The Federal Reserve's "third-in-command" supports further interest rate cuts: prioritize employment, not afraid of inflation

ChainCatcher news, Federal Reserve's number three, New York Fed President Williams stated that he supports further interest rate cuts this year, despite inflation deviating from the Fed's 2% target in recent months. His reasoning revolves around the cracks that have already appeared in the labor market, and Williams hopes to protect these cracks from deepening further.

On Wednesday, Williams said in an interview with The New York Times that he believes the economy is not on the brink of recession. However, he pointed out that the monthly job growth has slowed, along with other signs indicating that companies are more hesitant in hiring, which are worth noting. Currently, the Federal Reserve is in a dilemma. On one hand, Fed officials do not want to exacerbate the slowdown in the labor market.

But they also want to avoid inadvertently fueling inflation, as U.S. President Trump's tariffs have led to a resurgence in inflation. Williams stated that the Fed has the flexibility to support the labor market, as the inflation outlook does not seem as severe as it did earlier this year. Williams said that Trump's tariffs have indeed pushed up prices for some consumer goods, but he expects that despite the new import taxes on products like furniture and pharmaceuticals, the impact of tariffs on inflation will diminish over time.

Williams said, "The risk of further slowing in the labor market is a concern I am very focused on." He later added that if the economy develops as expected, with inflation rising to around 3% and the unemployment rate slightly above the current 4.3%, he would support "interest rate cuts this year, but we must be clear about what that really means." Williams indicated that even if a government shutdown leads to missing official data, he would not give up his willingness to take action at the upcoming Federal Reserve meeting.