Federal Reserve's Williams: December rate decision will be a "balanced move"

Federal Reserve Vice President and President of the New York Federal Reserve, Williams, stated that although wealthy American families are benefiting from the stock market boom, the financial pressure on middle and lower income Americans may threaten the resilience of the US economy. He said that the Federal Reserve's decision on interest rates in December is "indeed a balancing act." He pointed out, "Inflation remains high and there is currently no sign of a decline," but at the same time, "the US economy is showing some resilience." However, many Americans are still struggling with housing and other living costs. Williams stated that there is evidence that "low-income and middle-income families are facing some restrictions from an affordability standpoint." He added that this situation poses risks to consumer confidence and spending, as "many people are still living paycheck to paycheck." Williams also dismissed calls to change the Federal Reserve's benchmark interest rate mechanism, stating that the optimism brought by productivity improvements driven by artificial intelligence (AI) is supporting the market. However, he also acknowledged concerns about overinvestment and a stock market bubble in the market. It is worth mentioning that Williams previously stated last week that the market's estimate of the "neutral rate" may be too high. If this judgment is correct, the Federal Reserve still has room to continue cutting interest rates without weakening its efforts to contain inflation. In addition to Williams, many Federal Reserve officials have recently expressed their views on the outlook for the December interest rate meeting, with significant differences in positions among different officials. San Francisco Federal Reserve President Daly stated earlier last week that she supports the 25 basis point rate cut implemented by the Federal Reserve at the end of October and believes that in a situation where inflation is still above the 2% target but the labor market is cooling, "it would be appropriate to slightly lower the policy rate." St. Louis Federal Reserve President Bullard believes that the Fed's monetary easing measures over the past year are "aimed at providing protection for the labor market." He also expects there to be 50 to 75 basis points of policy adjustment space currently. Trump-appointed Federal Reserve Director Meerath called for more aggressive rate cuts, stating that credit pressures indicate that current policies are too restrictive, and he will continue to advocate for a significantly larger rate cut. Meanwhile, Chicago Federal Reserve President Evans has released a more hawkish signal. He stated that he has not yet decided whether to support a rate cut in December, and that currently, he has a higher threshold for rate cuts than in the previous two meetings. Evans stated that inflation has been above the target for four and a half years and the trend is still not ideal, making him cautious about further easing policies. He acknowledged that the labor market has cooled to some extent, but still believes that most indicators show stable labor demand. He specifically warned that premature rate cuts in the context of government shutdowns, incomplete data, and unclear inflation trends could make policy mistakes ahead of time, emphasizing that "rates should fall with inflation, not advance prematurely." Cleveland Federal Reserve President Harker stated that current inflation is still "too high" and the risks posed by the economy are greater than the slowdown in the labor market. She emphasized that monetary policy should continue to put pressure on inflation and pointed out that the current level of interest rates is "almost non-restrictive," suggesting that further rate cuts may be premature. Harker expects that US inflation will not reach the Federal Reserve's 2% target until at least one to two years after 2026, which means that the Federal Reserve will have failed to achieve price stability for nearly a decade. Federal Reserve Vice President Jefferson stated that given that interest rates have fallen to levels closer to neutrality (neither restrictive nor stimulating the economy), the Federal Reserve should be more cautious in its future policy actions. Jefferson pointed out that the current interest rates still have a "slightly restrictive" effect on the economy, but added, "As we approach neutral rates, slowing down action is a wise move."