John Williams, President of the New York Federal Reserve, expressed confidence in the Federal Reserve’s strategy to achieve a soft landing for the U.S. economy. He emphasized the central bank’s current monetary policy as effective in sustaining economic growth while curbing inflation.
What Happened: Williams highlighted the importance of the “very good” jobs report for September, which underscored the economy’s resilience. He noted the ongoing decline in inflation, which supports the Fed’s decision to slow the pace of rate cuts following a half-point reduction in September, Financial Times reported on Tuesday.
"The current stance of monetary policy is really well positioned to both hopefully keep maintaining the strength that we have in the economy and the labor market, but also continuing to see that inflation comes back to 2 percent," Williams said.
The strong jobs data has altered expectations, reducing the chances of another half-point cut in November, shortly after the U.S. presidential election. Williams, a key member of the Federal Open Market Committee, reaffirmed that the September rate decision was appropriate, considering the easing inflation and labor market conditions.
Williams also referenced the Fed’s “dot plot” forecasts, indicating two quarter-point cuts in upcoming meetings, but stressed that decisions would be data-driven. He aims to adjust interest rates to a “neutral” setting over time, acknowledging potential uncertainties in rate estimates.
Why It Matters: The Federal Reserve’s recent rate cut of 50 basis points, as noted by Goldman Sachs, is seen as a strategic move to maintain a soft landing trajectory for the U.S. economy. This decision marks the first significant cut since the early COVID-19 pandemic, aiming to boost market confidence and reduce capital costs.
Meanwhile, JPMorgan’s chief global strategist, David Kelly, has cautioned investors about the risks in the current market environment, despite the positive economic data and rate cuts. He expressed concerns about the market’s reliance on a soft landing scenario.
As U.S. banks prepare to report third-quarter earnings, analysts at Bank of America remain cautiously optimistic. They anticipate that a soft-landing scenario could boost customer activity and loan growth, positively impacting bank valuations. However, macro uncertainties, including Fed policy shifts and the upcoming U.S. elections, temper the enthusiasm.
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Illustration created using artificial intelligence via MidJourney.
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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