Federal Reserve Bank of New York President John Williams said late Monday that US monetary policy is now “well positioned” to guide inflation back to target without harming jobs. Williams signaled no urgency to resume interest-rate cuts as the central bank moves closer to a neutral policy stance.
Key quotes
Expects unemployment rate to stabilize this year.
Expects active usage of Federal Reserve repo operations.
Economic outlook is quite favorable in 2026.
Federal Reserve policy decisions will be driven by incoming data. Tariff impacts should diminish in 2026.
Imperative to get inflation back to 2%.
Inflation to peak at 2.75 to 3 percent in first half of year.
Tariff inflation largely borne by Americans.
Outside of tariffs, inflation trends mostly favorable.
Downside job risks increasing as inflation risks have diminished.
Inflation to cool later this year and hit 2% in 2027.
US likely to grow between 2.5% and 2.75% in 2026.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading around 98.90, down 0.24% on the day.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.