New York Fed President John Williams continues to see rates starting to fall in 2024, he said Monday, despite inflation rebounding in recent months and a still strong economy.
At some point we will have to begin a process to bring interest rates back to more normal levels. And my own view is that this process will probably start this year, John Williams said on Bloomberg TV.
I think that monetary policy is currently in a good place, he continued. Inflation, after falling rapidly in the final months of 2023, has rebounded since January. It stood at 3.5% over one year in March compared to 3.2% in February, according to the CPI index of the Department of Labor, on which pensions are indexed.
A rate cut expected in September?
Consequently, the American central bank (Fed), which had raised its rates to fight inflation, risks waiting before lowering them, in order to avoid an additional rebound in prices. Market players, who were still recently anticipating a first decline during the June meeting, are now counting instead on that of Septemberaccording to the CME Group assessment.
I think the economy will continue to grow at a solid rate this year, probably not as high as in 2023, when growth was 3.4% annualized, but around 2%, depending on the president of the New York Fed, who has permanent voting rights within the institution’s monetary policy committee.
US retail sales figures released on Monday showed stronger than expected growth in March, +0.7% compared to February. Consumer spending has been strong. I think this is based on solid fundamentals. Job growth has been solid. We have seen real wage gains in a fairly strong economy and good growth, commented John Williams.
We are enjoying a good tailwind on the supply side of the economy, good labor force growth, strong productivity and good real wage increases. So with that, consumers spend, he added.
As for tensions in the Middle East, John Williams stressed that he does not see this as a major factor in overall forecasts for economic growth or inflation.