Fed’s Williams
- We are at or near the peak of interest rate target
- Sees inflation falling to 2.25% in 2024
- Inflation will close in on 2% in 2025
- Financial conditions have tightened
- Sees GDP at 1.25% next year
- Sees unemployment at 4.25% next year
- Sees upside and downside risks for inflation
The headline here might be more hawkish than the comments. He seems to be largely signaling a shift to neutral, though not explicitly.
“The future remains highly uncertain, and our decisions will continue to be data-dependent,” Williams said … “in balancing these risks, and based on what I know now, my assessment is that we are at, or near, the peak level of the target range of the federal funds rate.”
He continued “if price pressures and imbalances persist more than I expect, additional policy firming may be needed.”
I’ve been focused on whether the Fed will shift to an explicit neutral stance but I’m coming around to the idea that’s not what matters for markets. It’s all about pricing in a pivot to dovish and to cutting rates. Fed pricing is 100% for the May 1 meeting, which is aggressive but they know that and they’re not pushing back. It will depend on the data.