Fed officials back cautious policy approach in light of economic uncertainty

WASHINGTON: New York Federal Reserve President John Williams said on Friday the US central bank’s monetary policy is in the right place given the myriad uncertainties facing the economy, noting that there’s no urgency to make any changes to interest rates.

“Modestly restrictive” monetary policy “is entirely appropriate given the solid labor market and inflation still running somewhat above our 2% goal,” Williams said in a speech in the Bahamas.

In comments to reporters after his formal remarks, Williams said the Fed eventually will need to cut rates back to a level deemed neutral in regard to its impact on the economy. But in the meantime, “the downside risk to economic growth and the upside risk to inflation (are) both very high,” in a climate where broader government policies are shifting rapidly and unpredictably, he said.

With monetary policy “in a good place” to deal with what lies ahead, Williams said “let’s collect more data” and “we’re not in a hurry” to make any changes in the setting of monetary policy.

Chicago Fed President Austan Goolsbee echoed Williams’ monetary policy caution, telling CNBC on Friday that uncertainty argued for the Fed standing aside until more clarity emerged.

Goolsbee said the economy was strong and that he’s waiting to see how President Donald Trump’s tariffs, which many economists expect to worsen a challenging inflation situation, play out.

Williams and Goolsbee weighed in two days after Fed policymakers left the central bank’s benchmark interest rate in the 4.25%-4.50% range and signaled they still expect to lower it at some point later this year.