New York Federal Reserve President John Williams pushed back against growing market expectations for interest-rate cuts, calling talks of a March reduction "premature."
"We aren’t really talking about rate cuts right now," Williams said Friday during an interview on CNBC. "We’re very focused on the question in front of us, which is, have we gotten monetary policy to a sufficiently restrictive stance in order to ensure that inflation comes back down to 2%? That’s the question in front of us."
His comments come just days after the Fed signaled that its nearly two-year fight against inflation is finally coming to an end as it forecast a series of rate cuts in 2024. Markets surged as the central bank penciled in three rate cuts in 2024, with the Dow Jones Industrial Average topping 37,000 on Wednesday for the first time ever.
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Traders began betting on even more aggressive rate cuts, starting as early as March, but Williams sought to temper some of those expectations on Friday.
"I just think it’s just premature to be even thinking about that," Williams said when asked about the possibility of a March rate cut.
Despite that, about 73% of investors are still pricing in at least a quarter-point cut in March, according to the CME Group's FedWatch tool, which tracks trading.
Updated quarterly economic projections laid out after the Fed's meeting on Wednesday show that a majority of FOMC officials expect rates to fall to 4.6% by the end of 2024, suggesting that there will be at least three quarter-point rate cuts next year.
Policymakers also penciled in additional rate cuts in 2025 and 2026.
In a statement released after the meeting, the policy-setting Federal Open Market Committee acknowledged that "inflation has eased over the past year but remains elevated" and said it would watch the economy to see whether "any" additional rate hikes are needed – a change that indicates many officials believe further tightening is not necessary at this point.
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"We added the word ‘any’ as an acknowledgment that we are likely at, or near, the peak rate for this cycle," Fed Chair Jerome Powell told reporters at the post-meeting press conference in Washington, D.C. "But participants also didn't want to take the possibility of further hikes off the table."
No officials see rates rising further next year.
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"We’re definitely seeing slowing in inflation," Williams said. "Monetary policy is working as intended. We just got to make sure that . . . inflation is coming back to 2% on a sustained basis."
