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John Williams of the Federal Reserve said that the bank is not “actually discussing rate cuts at the moment”

The central bank is currently not discussing Friday rate cuts, according to John Williams, president of the New York Federal Reserve.

On “Squawk Box” on CNBC, he stated, “We aren’t really talking about rate cuts right now.” ” We’re laser-focused on the question at hand, which, as chair Powell pointed out… is, have we achieved a restrictive stance in monetary policy to guarantee that inflation returns to 2%?” That question confronts us.

Traders saw the Federal Reserve’s Wednesday prediction for three rate cuts next year as a signal that the central bank will start lowering rates sooner than expected next year, leading to a record-high Dow Jones Industrial Average and a 10-year Treasury yield that dipped below 4.3%.

Fed funds futures indicate that traders are placing bets that the central bank will reduce rates more than three times. Rate cuts by the Federal Reserve might begin as early as March, according to futures markets.

Evidently, Williams is trying to tone down some of that zeal.

Williams expressed his belief that it is too early to consider a rate decrease in March in response to a question regarding the futures price of such a move.

If the trend of declining inflation were to reverse, the Fed is prepared to tighten policy again, according to Williams, who added that the Fed will continue to rely on data.

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Williams warned that “things can change,” despite the fact that the situation appeared to be adequately limited. “If inflation were to halt or reverse, we need to be prepared to further tighten policy, as we’ve learned in the past year that data can move in surprising ways.”

According to the Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures price index, inflation is expected to drop to 2.4% in 2024, 2.2% in 2025, and 2% in 2026. On a year-over-year basis, the gauge increased by 3.5% in October.

Inflation is clearly declining. Williams stated that monetary policy was functioning as planned. “All we have to do is guarantee that… inflation is consistently returning to 2%.”

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