The top three officials of the Federal Reserve: Monetary policy is already "fully prepared" for 2026, with inflation and employment risks roughly balanced at present.

New York Fed President John Williams said that, following the rate cut last week, monetary policy is well prepared for next year given the increase in job risks and a decrease in inflation risks. In a speech prepared for an event in Jersey City, New Jersey on Monday, Williams mentioned the Federal Open Market Committee (FOMC) and stated, "Monetary policy is very focused on achieving a balance of these risks. To that end, the FOMC has shifted its moderately restrictive monetary policy stance to a neutral one." He added, "With these actions taken, our monetary policy is positioned favorably for entering 2026." Since last week's rate cut by a quarter point, policy makers have demonstrated clear differences in views. This is the third consecutive rate cut this year, bringing the Fed's target range to 3.5% to 3.75%. This move faced dissent from three policy makers, including two regional Fed presidents leaning towards keeping rates unchanged and one Fed Governor, Stephen Moore, inclined to a larger half-point rate cut. Williams stated that due to fiscal support, "favorable financial conditions," and investment in artificial intelligence, economic growth is expected to accelerate to around 2.25% next year (higher than the estimated 1.5% for 2025). He also mentioned that inflation is expected to drop slightly below 2.5% next year, then reach the Fed's 2% target in 2027. In the Q&A session following his speech, the New York Fed President hinted that the current monetary policy is calibrated to address any key risks to the central bank's main goals - whether it be excessive inflation or an overly weak job market. Balancing Act Williams said, "This year, we have lowered interest rates in a way that we believe will balance these competing risks well based on data and outlook." He said, "We cannot be certain about trade policy, inflation, or the economy next year, but I believe we are well prepared for it." The day after his speech, the US Bureau of Labor Statistics released crucial employment data, which was delayed due to the government shutdown causing delays in data release for October and November. Williams told reporters after the event that he expects the report to "essentially match what we've been seeing - relatively slow job growth and signs of gradual cooling in the labor market." He added that it is too early to discuss the possible options for the Fed's next policy meeting in January next year, but he is "very supportive" of last week's rate cut. Also speaking on Monday, Boston Fed President Susan Collins stated that her decision to support the December rate cut was a "difficult choice." Collins said in a post on LinkedIn on Monday, "While my analysis in November leaned towards keeping policy unchanged, by the December meeting, the existing information indicated a slight shift in the balance of risks." Governor Stephen Moore reiterated his view that the current policy is still too restrictive. In an interview, he also revealed that he may continue to serve at the Fed after his term expires until a new successor is confirmed. Moore's term ends on January 31, but he has the right to continue in office until a replacement is confirmed by the US Senate. It is expected that Trump will appoint his chosen successor to replace Powell when his term as chairman ends in May, and appoint that nominee to replace Moore on the Board. Moore is currently on unpaid leave from his position as chairman of the White House Council of Economic Advisers.