John Williams, the President of the Federal Reserve Bank of New York, has indicated that the recent Consumer Price Index (CPI) data may have presented a slightly skewed picture of inflation. He suggested that these readings could be influenced by temporary factors, leading to a potential underestimation of price pressures.
Speaking in an interview on Friday, Williams emphasized that he does not feel any immediate need to alter the current monetary policy, which he believes is in a “good place.” This stance allows the Fed to carefully observe incoming economic data and assess its implications for inflation and growth.
The sentiment from the New York Fed President comes as the central bank continues to navigate a complex economic landscape. While acknowledging encouraging signs of disinflation, Williams also highlighted the importance of sustained data to confirm these trends. This information was reported by Estadão Conteúdo.
Monetary Policy Positioned for Observation
Williams stated that U.S. monetary policy is currently “moderately restrictive” and has room to move back towards a neutral stance. He estimates the neutral real interest rate to be slightly below 1%, with the current policy rate positioned just above that level. This approach, he believes, is helpful given that inflation remains above the Fed’s target.
While anticipating that interest rates will eventually decline further, Williams stressed the need to first observe how the economy performs. He expressed “considerable confidence” in the baseline economic scenario, despite 2025 being a year of significant uncertainty.
Economic Growth and Productivity Outlook
Looking ahead, Williams projected that U.S. Gross Domestic Product (GDP) growth for the current year will likely fall between 1% and 1.5%. He anticipates a more robust recovery in 2026. Furthermore, he views an increase in productivity growth as a positive development for the economy, noting its potential to be disinflationary if sustained.
Artificial Intelligence’s Role in the Economy
The New York Fed President also addressed the impact of artificial intelligence (AI) on the labor market. Williams acknowledged that AI is likely to bring about significant changes in how work is conducted but does not foresee it posing a systemic risk to the financial system. He assured that the Fed would adjust monetary policy if necessary due to AI’s influence, but the primary focus remains on the economy and achieving the dual mandate of maximum employment and price stability.
Data on Inflation and Employment
Williams described the latest U.S. economic data as “encouraging” and indicative of continued disinflation. However, he cautioned about the recent CPI reading, suggesting that it might have been slightly lower than reality due to data collection issues by the Bureau of Labor Statistics (BLS). He indicated that more data, spanning “one or two months,” would be needed for a precise inflation assessment, with December’s figures expected to provide greater clarity.
Regarding the labor market, Williams noted that the unemployment rate may have also been affected by distortions, possibly by a tenth of a percentage point. Nevertheless, he stated that there are no signs of a significant deterioration in employment data. He concluded that the current data aligns with recent trends and the Fed’s recent interest rate cut, reinforcing his existing economic outlook.
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