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Inflation is likely to slow toward 2% and pave the way for reductions in U.S. interest rates “later this year,” the president of the New York Federal Reserve Bank said this week.
John Williams said the hot inflation readings in January are likely just a ”bump” — a word being used by most Fed officials — and that price pressures are subsiding.
“Inflation’s still above 2%, but definitely now below 3%,” Williams said in an interview with Axios that was published Friday. “And I think the signs are consistent with it continuing to come down, trend down going forward.”
The rate of inflation, using the Fed’s preferred personal consumption expenditures, or PCE, price index, has slowed to 2.6% as of January, from a peak of 7.1% in mid-2022.
Still, the Fed wants to see more progress before cutting interest rates.
“Things are moving [in] the right direction,” Williams said. “I just want to see that continue.”
Williams was not more specific about the timing of rate cuts. Wall Street is now forecasting that the first reduction will take place in June, rather than in March as investors had hoped only a month ago.
