New York Fed President: Middle East conflict delays rate cut timing, no clear reason for short-term rate hike.

On Monday, New York Fed President Williams said that if inflation falls as expected to the Fed's target of 2%, interest rates "will need to be lowered at some point," but current inflation pressures are higher than previously expected, which may delay the timing of rate cuts. After his speech in New York, Williams told the media, "As inflation falls, at some point in the future we will need to decrease interest rates. However, inflation this year is higher than previously expected, which means that the timing of rate cuts may be delayed, but it will not change the basic path." Last week, the Fed kept its benchmark interest rate unchanged, but three officials expressed dissent with the "dovish bias" in the statement, advocating retaining the option to raise or lower rates in the future. Williams said he was "very satisfied" with the current policy statement wording, and pointed out that based on recent economic data, there is no clear reason to support a near-term rate hike. Williams pointed out in his speech that supply chain disruptions caused by the Iran war have had a "significant impact" on the economy, requiring a balance between price stability and full employment in monetary policy. He said that in the current environment, high inflation, mixed signals in the labor market, and geopolitical uncertainty have created a complex policy backdrop, but the current monetary policy stance "can effectively balance these risks." Williams also compared the current supply chain issues to the post-pandemic period, believing that there are similarities, but the risks of sustained inflation in this round are relatively low. He noted that unlike in 2021, the labor market has not significantly pushed up inflation now, while core inflation, excluding imported goods and energy, remains stable and there is no clear "second-round effect." Due to the conflict, U.S. gasoline prices have risen to their highest levels since 2022, making it difficult for inflation to fall to the target level. Williams expects U.S. inflation to remain around 3% this year and fall to the 2% target level by 2027. In terms of economic outlook, Williams expects the U.S. economy to grow by about 2% to 2.25% this year and next, with the unemployment rate remaining in the range of 4.25% to 4.5%. The market will be watching for the upcoming job data. According to economists' forecasts, the U.S. added non-farm payrolls are expected to be 65,000 in April, lower than 178,000 in March, but will still mark the first consecutive two months of job growth in nearly a year. Williams pointed out that the recent slowdown in hiring is partly due to aging population and reduced immigration, leading to slower growth in labor supply. He said that in the current environment, even if monthly job growth is only 30,000, it can be considered a "good performance," and occasional small negative growth is a normal fluctuation.