More Fed's Williams: Very supportive of US central bank's decision to cut interest rates

Fed's Williams Supports Rate Cut

New York Fed President Williams expressed strong support for the recent interest rate cut, stating it was justified. He anticipates that upcoming job data will reflect a gradual cooling of the labor market. Williams noted that it is too early to ascertain what the Fed will decide in January. He highlighted the strength of the markets as a contributing factor for robust economic growth expectations in 2026.

Economic Fundamentals and Market Valuations

While acknowledging elevated market valuations, Williams argued there are reasons behind the current pricing. He pointed out discrepancies in underlying economic strength compared to GDP data, indicating a nuanced outlook that remains mildly dovish but balanced.

Inflation and Labor Market

Williams projects inflation to ease to 2.5% by 2026 and 2% by 2027, alongside expectations for a gradual cooling of the labor market while the unemployment rate could decline over the next few years. He characterized Fed policy as moving toward neutral, suggesting no immediate action is likely despite some market expectations for a rate cut in January and additional cuts in 2026.