Fed's Williams says monetary policy well positioned amid a favorable outlook

• The Fed cut rates by 0.75 percentage points in 2025 to a range of 3.5-3.75%, with officials projecting only one more cut in 2026 as they balance labor market concerns against above-target inflation
• Williams forecasts inflation will peak at 2.75-3% in early 2026 before declining to 2.5% for the full year, with unemployment stabilizing and then retreating in following years
• Fed Chair Powell stated that grand jury subpoenas targeting the central bank are 'pretexts' aimed at directing monetary policy through political pressure rather than evidence-based decision making

Summary: Fed's Williams Signals No Imminent Rate Cuts Amid Political Pressures

Key Developments:

Federal Reserve Bank of New York President John Williams indicated Monday that monetary policy is "well positioned" and sees no near-term need for interest rate cuts. Speaking to the Council on Foreign Relations, Williams described the Fed's current stance as "modestly restrictive" moving "closer to neutral."

Economic Outlook:

• GDP Growth: Expected at 2.5%-2.75% for 2026
• Inflation: Projected to peak at 2.75%-3% in H1 2026, then decline to 2.5% for the full year, reaching the 2% target by 2027
• Unemployment: Expected to stabilize in 2026 and decline in subsequent years
• Current Rate: Fed funds target range at 3.5%-3.75% after three-quarters of a percentage point in cuts during 2025

Policy Context:

The Fed is widely viewed as entering a holding pattern following last year's rate cuts. In December, officials projected only one additional rate cut for 2026, balancing concerns about a cooling labor market against above-target inflation. Williams emphasized the importance of returning inflation to 2% "without creating undue risks" to employment.

Political Tensions:

Williams' remarks came amid mounting pressure on Fed independence. The central bank received grand jury subpoenas over renovation cost overruns, which Fed Chair Jerome Powell called "pretexts" for political intimidation. Williams warned that compromising central bank independence "often leads to very unfortunate economic outcomes" including high inflation, while defending Powell's "impeccable integrity."

President Trump continues pressuring the Fed for aggressive rate cuts despite persistent above-target inflation.