US Federal Reserve officials have signaled a cautious approach to monetary policy amid economic uncertainty. New York Fed President John Williams stated that the current “modestly restrictive” policy is appropriate given solid labor markets and inflation above the 2% goal.
Williams emphasized the need for data-driven decision-making, saying there’s no urgency to change interest rates. However, he highlighted the high risks of both economic growth slowing and inflation rising. Chicago Fed President Austan Goolsbee echoed this sentiment, arguing that uncertainty requires patience until more clarity emerges on government policies.
The Fed’s recent benchmark interest rate range remains unchanged at 4.25-4.50%, with policymakers signaling a potential reduction later this year. Officials also acknowledged the impact of President Trump’s tariffs, which are expected to worsen inflation pressures in the short term.
Williams warned that the economy faces significant uncertainties, including lower immigration rates and geopolitical developments. He stressed the importance of careful analysis, noting that assigning probabilities to scenarios is challenging. The Fed will continue to monitor data and adjust its approach as necessary.
In a related move, the Fed announced a slower pace of balance sheet drawdown, with the monthly cap on Treasuries to be reduced from $25 billion to $5 billion starting in April. This decision was made to address government financing volatility and emerging signs of tightness in money markets.
Source: https://www.reuters.com/markets/us/feds-williams-says-monetary-policy-right-place-amid-notable-uncertainty-2025-03-21