US Fed's John Williams says there is no urgent need to cut rates again

Federal Reserve President John Williams told CNBC on Friday he does ⁠not see an imminent need to follow last week’s interest rate cut with another reduction in borrowing costs, adding that new inflation data is being buffeted by distortions. Williams said he doesn’t “have a sense of urgency to need to act further on monetary policy right now, because I think the cuts we’ve made have positioned us really well,” he ‌said in the interview ‌with CNBC. A key goal of Fed policy right now is to buoy the labor market while helping to guide inflation back to the 2% target, and with that balancing act, Williams said ‌when it comes to interest rate policy, “I feel like we’ve got this in a pretty good place.” Williams said the resumption of key data on inflation and hiring in the wake of the resolution of the recent 43-day government shutdown has not proved to be a game changer, while adding there are some technical issues at the moment that complicate interpretation of the new figures. In the case of the release on Thursday of the Consumer Price Index for November, Williams ​said the report “represents a continuation of the disinflationary process we’ve seen.” He added, however, special factors and ​technical issues with the report due to incomplete data collection suggest “the data were distorted in some of the categories, and that pushed down ‌the CPI reading probably by ‍a tenth (of a percentage point) or so” on its reading.

The CPI increased 2.7% on a year-over-year basis in ‍November after advancing 3.0% in the 12 months through September. On the hiring front, Williams also ‌saw some complications tied to the data. “We’re seeing steady job gains … especially in the private sector,” he said, adding that “because they weren’t able to collect the data in October, it probably boosted the unemployment rate in November, maybe by a tenth (of a percentage point),” but even then, the findings weren’t much of a surprise.

MARKETS LOOK TO FED’S JANUARY MEETING

The Fed trimmed its benchmark overnight interest rate by a quarter of a percentage point to the 3.50%-3.75% range, as policymakers sought to balance supporting a weakening job market with efforts to bring still-high levels of inflation back to the 2% target. Markets are debating whether the U.S. central bank will be able to deliver another rate cut at its meeting in ‍late January, but officials have yet to provide much guidance on that front. Williams’ comments on Friday reiterated his view that he needs to see more data before he is comfortable with the Fed cutting rates again and that another cut in ‍January might be ⁠a difficult decision. Williams noted that “we’re still mildly restrictive ⁠in terms of the stance of monetary policy. We still have some room to go, ultimately, to get back to neutral.” He also said “I do see eventually rates coming down lower, because as inflation comes down all the way to 2%, we’ll need to have an interest rate that’s consistent with that.”

He added that the Fed’s move to restart asset buying to rebuild the size of its balance sheet is not a form of stimulus known as quantitative easing, or QE, and is technical in nature. “We are … obviously not doing QE, from my point of view, we’re not trying to change the 10-year, you know, term premium or something like that,” Williams said of the large amount of Treasury bills the Fed has started buying. The purchases are designed “to provide reserves to the banking system to meet the demand that the banks in our country and that operate here need in order to carry out their business.”