Federal Reserve Board of NY President Says Central Bank is Committed to 2% Inflation Goal

Williams says uncertain outlook indicates Fed will maintain restrictive policy until inflation reaches 2% on sustained basis.

Federal Reserve Bank of New York President and CEO John Williams
Federal Reserve Bank of New York President and CEO John Williams

WHITE PLAINS—Bolstered by recent positive economic data and lower inflation, many of the nearly 200 business, real estate and finance executives were no doubt hoping that Federal Reserve Bank of New York President and CEO John Williams would in his speech at The Opus Westchester here on Jan. 10 preview when and how many rate cuts the Central Bank would institute this year.

If that was the case, they left the session disappointed.

The real estate sector, battered by high interest rates and low inventory, has rallied around predictions by some Wall Street analysts that the Federal Reserve is negotiating a soft economic landing and that the Fed could cut rates by as many as four times this year.  While the Federal Reserve Board’s latest summary of economic projections, issued in December, indicated possibly three cuts could be in the offing this year, most of Williams’ speech covered the progress that has been made in the fight against inflation and the Central Bank’s staunch commitment to bring inflation down to its 2% goal.

In response to the latest economic data, Williams said, “If we put all these pieces together, the data indicate that we are clearly moving in the right direction. However, we still are a ways from our price stability goal.”

In fact, Williams did not specifically mention rate cuts, but did say, “My base case is that the current restrictive stance of monetary policy will continue to restore balance and bring inflation back to our 2% longer-run goal. I expect that we will need to maintain a restrictive stance of policy for some time to fully achieve our goals, and it will only be appropriate to dial back the degree of policy restraint when we are confident that inflation is moving toward 2% on a sustained basis.”

He added, “The outlook remains highly uncertain, and I will continue to carefully watch and assess the data to judge whether the stance of policy is best positioned to achieve our goals.” He said the Fed’s  policy decisions will be made meeting by meeting and will focus on “looking at the totality of the incoming data, the evolving outlook, and the balance of risks,” he noted.

Williams shared that the Federal Reserve’s work and actions are guided by a dual mandate—to achieve maximum employment and price stability. “When it comes to employment—the first half of the mandate—things are looking very good. The economy added nearly 2.9 million payroll jobs in 2023,” he said. Williams later added that the national unemployment rate has been at or below 4% for two straight years now, the longest such stretch in over five decades. “The current unemployment rate of 3.7% is in line with my 3% to 3% to 4% estimate for the unemployment rate that is likely to prevail over the longer run,” he noted.

“On the price stability side, the situation has improved significantly since the sharp rise in inflation that followed the onset of the pandemic and Russia’s invasion of Ukraine. Inflation, as measured by the personal consumption expenditures (PCE) price index, surged to a 40-year high of about 7% in June of 2022,” Williams said. “Over the past year and a half, the inflation rate has fallen back to just over 2.5%. This decrease is a clearly positive development, but it is important to stress that we still have a ways to go to get inflation back to the FOMC’s longer-run goal of 2%. Price stability is the bedrock upon which our economic prosperity stands and is essential to ensure maximum employment over the long term.”

Williams then discussed what he termed as the “three layers of the inflation onion”—globally-traded commodities, core goods and core services inflation. He said that global commodities demand has come into better balance and core goods, which excludes food and energy—is also benefitting from the rebalancing of supply and demand, both here and abroad. “The inflation rate in this layer of the onion has dropped to near zero, reflecting cooling demand and the resolution of supply chain bottlenecks that contributed to rapid price increases,” he noted.

He said that the Federal Reserve is also seeing “significant progress” in the third layer of the inflation onion, core services inflation. “Core services inflation has come down after peaking early last year. One factor contributing to this is slowing shelter inflation, as the growth of rents for newly signed leases returns to pre-pandemic norms. And the inflation rate for core services excluding housing has also slowed considerably,” he said.

He concluded his remarks by saying that the strong actions that Federal Reserve has taken over the past two years are working as intended and that it has seen meaningful progress on restoring balance to the economy and bringing inflation down. However, he stressed, “our work is not done. I am committed to achieving our 2% longer-run inflation goal and creating a strong foundation for our economic future.”

The session was sponsored by commercial real estate brokerage firm RM Friedland, OneKey MLS, The Bronx Economic Development Corp., the Westchester County Office of Economic Development, the Business Initiative Corp., the Building and Realty Institute and the law firm of Cuddy & Feder, LLP.

NY Fed Report: Inflation Expectations

Decline to Lowest Level in Three Years

A day before the White Plains session with Williams, the Federal Reserve Bank of New York’s Center for Microeconomic Data released its December 2023 Survey of Consumer Expectations, which showed that short-, medium- and longer-term inflation expectations declined during the month.

Notably, inflation expectations at the short-term horizon reached the lowest level recorded since January 2021. Earnings growth and spending growth expectations also decreased slightly to their lowest recorded levels since 2021, while expectations about credit access and households’ financial situation turned less pessimistic. 

The main findings of the December 2023 Survey included:


  • Median inflation expectations declined at all horizons, falling to 3.0% from 3.4% at the one-year ahead horizon, to 2.6% from 3.0% at the three-year ahead horizon, and to 2.5% from 2.7% at the five-year ahead horizon. Median inflation expectations at the one-year ahead horizon reached the lowest level recorded since January 2021. The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) increased at the one-year ahead horizon, and decreased at the three-year and five-year ahead horizons.
  • Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—remained essentially unchanged at all three horizons.
  • Median home price growth expectations remained unchanged at 3.0%, remaining well above the series 12-month trailing average of 2.4%.
  • Median year-ahead expected price changes increased by 0.5 percentage point for the cost of a college education to 6.3%, decreased by 0.3 percentage point for food to 5.0%, decreased by 0.7 percentage point for rent to 7.3%, and remained flat for gas at 4.5% and the cost of medical care at 9.1%.
  • The mean perceived probability of finding a job (if one’s current job was lost) increased marginally to 55.9% from 55.2% in November.

Labor Market

  • Median one-year-ahead expected earnings growth decreased by 0.2 percentage point to 2.5%, the lowest level since April 2021. The decline was driven by respondents with at most a high school diploma.
  • Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased by 1.4 percentage points to 37.0%, remaining below the series 12-month trailing average of 39.5%.
  • The mean perceived probability of losing one’s job in the next 12 months decreased slightly by 0.2 percentage points to 13.4%, remaining above the series 12-month trailing average of 12.3%. The mean probability of leaving one’s job voluntarily in the next 12 months increased by 0.8 percentage point to 20.4%.

Household Finance

  • The median expected growth in household income decreased by 0.1 percentage point to 3.0%, remaining above the February 2020 pre-pandemic level of 2.7% . The series has been moving within a narrow range of 2.9% to 3.3% since January 2023.
  • Median household spending growth expectations declined by 0.2 percentage point to 5.0%, reaching the lowest level recorded since September 2021. Still, the series remains well above its February 2020 pre-pandemic level of 3.1%.
  • Perceptions of credit access compared to a year ago were largely unchanged. Expectations about credit access a year from now instead improved with a larger share of respondents expecting looser credit conditions and a smaller share of respondents expecting tighter credit conditions a year from now.

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