President of the New York Federal Reserve: Inflation is expected to slowly rise to 2%, policy uncertainty casts a shadow over the economic outlook.

New York Fed President John Williams said that he expects inflation to continue progressing towards the 2% target, but he warned that policy-related uncertainties have cast a shadow over the economic outlook. Williams said in a speech prepared for an event at Pace University in New York on Tuesday, "A moderately restrictive policy stance should support inflation returning to 2%, while maintaining a robust labor market." "But it is important to note that the economic outlook remains highly uncertain, especially in potential fiscal, trade, immigration, and regulatory policies." Williams pointed out that many signs indicate that inflation will continue to decline, including slowing wage growth and stable inflation expectations. However, he noted that the Fed will need "time" to continue achieving the 2% target. He expects house price inflation to be around 2.5% this year, and to fall to 2% in the "next few years." After cutting rates by a quarter point in the last few months of 2024, officials kept rates unchanged in January. Earlier on Tuesday, Federal Reserve Chairman Jerome Powell reiterated to lawmakers that the Fed is not in a hurry to adjust rates. Cleveland Fed President Loretta Mester also made remarks on Tuesday, calling for patience. She said that it is appropriate to maintain stable interest rates for a "period of time" while officials wait for evidence of declining inflation and analyze the economic impacts of new government policies. Impact of tariffs President Donald Trump ordered a 25% tariff on steel and aluminum imports, as well as a 10% tariff on all imports from China, and tariffs on goods from Canada and Mexico have been delayed. Williams said in an interview after the meeting that he will closely monitor prices to analyze the impact of tariffs. Williams said, "It really depends on whether they are producing consumer goods or intermediate goods, such as steel and aluminum." "These may have longer-lasting effects on prices because these impacts can permeate into other goods and services." The closely watched inflation indicator Consumer Price Index (CPI) will be released on Wednesday for January data. Williams said that the labor market has cooled significantly in recent years, but remains stable. He expects the US economy to grow at around 2% in 2025 and 2026 after adjusting for inflation factors. He said, "From our current situation, the economy is in a very good position." Williams reiterated that the Fed's efforts to reduce its $6.8 trillion balance sheet are "on track."