New York Fed President John Williams says the central bank is ready to “reassess and re-evaluate our views” about future interest-rate hikes in the wake of the stock-market selloff.
“What we’re going to be doing going into next year is re-assessing our views on the economy, listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and re-evaluate our views,” Williams told CNBC.
“We are listening, there are risks to that outlook that maybe the economy will slow further,” he explained.
The U.S. central bank’s expectations for further increases in interest rates are based on its outlook for a strong economy and are not a commitment or a promise to hike, Williams said.
"This is not a commitment, or a promise, or in any way a sense that we know for sure that’s what we are going to do," Williams said.
"We are actually saying pretty clearly this is how we see it now based on our positive, pretty optimistic view of the economy, and we will change that as needed."
The Fed’s rate-setting committee, of which Williams is vice chairman, voted Wednesday to raise interest rates for a ninth time in three years and published projections signaling it expects two hikes in 2019, Bloomberg explained.
Williams endorsed the rate-hike projections published Wednesday, saying “something like two rate increases” next year “would make sense in the context of a really strong economy moving forward.” He also suggested the Fed didn’t yet need to rethink it’s balance-sheet unwind given the strong outlook, but stressed policy makers would be flexible as conditions change.
“We did not make a decision to change the balance-sheet normalization right now, but as I said, we’re going to go into the new year with eyes wide open,” Williams said. “I don’t see the need today to change our balance-sheet normalization.”
The benchmark S&P 500 Index of U.S. stocks has fallen 15 percent from September’s record high, to the lowest levels in 15 months, amid rising interest rates and growing concerns over global growth.
Fed Chairman Jerome Powell’s press conference Wednesday following the rate-hike announcement led to more selling in financial markets as he voiced confidence that the economy would likely remain strong enough in the year ahead to require additional rate increases.
“Maybe the Fed is not being proactive, but they are not entirely oblivious to what is going on,” said Priya Misra, head of global rates strategy at TD Securities. Williams “provided that little bit of a shoulder for the market to lean on, which I think Chair Powell sounded a little more blase about.”
Material from Bloomberg and Reuters has been used in this report.
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