Federal Reserve Bank of New York President John Williams said Thursday he sees no imminent need for a change in central bank interest rate policy as Trump administration tariffs are likely to drive up inflation, weaken growth and push up unemployment.
“I think monetary policy is well positioned,” Williams said in an interview on television channel Fox Business. “I don't see any need to change the setting of the fed funds rate anytime soon.”
Williams, who also serves as vice-chairman of the rate-setting Federal Open Market Committee, noted in his interview there was considerable uncertainty around the outlook. He reiterated his view that growth is likely to slide under 1% this year amid a rise in the unemployment rate from the current 4.2% to between 4.5% and 5%, as President Donald Trump's import tax surge pushes up price pressures at least for now.
"That's not a recession, that's just a slower outlook, slower growth than you've seen in the past couple years," Williams said.
The Fed official did not say how much he expects Trump's import tax increases to drive up inflation but said "we will definitely get effects on prices and inflation this year from tariffs."
Williams said it was critical for the Fed to make sure any of those inflation rises do not prove enduring.
"We need to make sure that any one-time changes in prices don't pass through into more persistent higher inflation," he said, adding "we need to get inflation back to 2%...and do that on a sustained basis." He added keeping inflation expectations in check remains important.
Williams' interview came a day after Fed Chair Jerome Powell spoke, with the central bank leader also warning of higher price pressures due to tariffs. Powell said that now was a time for the central bank to watch the economy for fresh data before changing rates.
Those comments earned Powell a fresh rebuke from the president, who wants the Fed to cut rates despite inflation that is above target. The president also appeared to threaten Powell's job, saying termination "cannot come fast enough."
If Trump were to try to fire Powell, it remains unclear the law would support such a move and it would almost certainly spark a major market crisis amid already unsettled financial conditions. Powell's current term as Fed chair extends to next year.
