New York Federal Reserve President John Williams on Wednesday said he is ready to "act as appropriate" to help America avoid an economic downturn but so far the economy appeared to be in a good place.
Williams, a key voice in discussions at the U.S. central bank ahead of a meeting later this month to discuss whether the economy needs an interest rate cut, said policymakers need to be flexible about monetary policy decisions.
"We need to consider all of the information available and be flexible in our response," he said in prepared remarks at a conference on securities linked to inflation.
“Low inflation is indeed the problem of this era. The current outlook of moderate growth, low unemployment, but stubbornly low inflation is a reflection of the broader economic picture,” Williams said. “I am carefully monitoring this nuanced picture and remain vigilant to act as appropriate to support continuing growth, a strong labor market, and a sustained return to 2 percent inflation.”
The Fed is widely expected to lower rates at the close of its Sept. 17-18 meeting after ordering a 25 basis point cut in July, the central bank's first rate cut since 2008.
Williams noted that the U.S. labor market still appears strong but that he was carefully watching a host of factors that could weigh on the economic outlook, including a global economic slowdown, U.S.-China trade policies and the possibility of an economically disruptive British exit from the European Union.
"I am carefully monitoring this nuanced picture and remain vigilant to act as appropriate to support continuing growth, a strong labor market, and a sustained return to 2% inflation," he said.
Williams' public remarks were his first since July, when he made comments that triggered an upsurge in expectations for a half-point rate cut at the Fed's meeting later that month. The New York Fed took the unusual step later that day of clarifying that his comments were not about pending policy actions.
Williams supported the Fed's July 31 rate cut, and on Wednesday he said the Fed's policies and communications had eased financial conditions and should help the economy stay on track.
But he also said he was focused on persistently weak U.S. inflation readings. The Fed targets 2% inflation but a core reading for price gains has been holding about a half percentage point below that.
He said the economic weakness abroad was a disinflationary pressure he was monitoring.
"My number one goal is to keep the expansion on track," he said.
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