Feb. 28 (Reuters) On Wednesday, New York Federal Reserve President John Williams said that while the U.S. central bank's 2% inflation target is still far off, data could lead to interest rate decreases this year.
"While the economy has come a long way toward achieving better balance and reaching our 2% inflation goal, we are not there yet," Williams said. "I am committed to fully restoring price stability in the context of a strong economy and labor market."
Williams addressed a Long Island Association meeting in Garden City. He did not provide more information on the U.S. central bank's monetary strategy, although he did say rates may be lowered "later this year." Williams said the Fed "has the time" to evaluate data before lowering borrowing costs and "as we navigate the remainder of this journey, I will be focused on the data, the economic outlook, and the risks, in evaluating the appropriate path for monetary policy that best achieves our goals."
At their December policy meeting, Fed officials planned three rate cuts to the benchmark overnight interest rate, presently 5.25%-5.50%. Financial markets have delayed the first rate cut due to inflation statistics.
Williams told reporters after his speech that the economy appears like it did in December when officials reduced rates. He said "my view is that something like the three-rate-cuts-this-year projection from December is a reasonable kind of starting point" for the Fed to debate and that "we're in a good position" to use monetary policy to achieve its goals.
The Fed will update economic and monetary policy predictions at its March 19-20 policy meeting. Williams said inflation has "declined significantly" over the past year and a half due to "broad-based" retreats in inflation components in his address. He said, "we still have a ways to go on the journey to sustained 2% inflation."
Williams expects inflation to fall to 2%–2.25% this year and 2% next year. In December, personal consumption expenditures price index inflation rose 2.6% over the previous year.
Williams indicated there may be "bumps along the way" back to 2% due to unexpectedly strong consumer inflation statistics. Williams forecasts economic growth to decelerate to 1.5% and the jobless rate to soar to 4% this year. Despite concerns, the economy is better balanced, he said.
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