Washington (AFP) – The US Federal Reserve is in a strong position to weather the “highly uncertain” economic outlook, but its inflation fight will take time to win, a senior US central bank official said Tuesday.
“As we enter 2025, the economy is in a good place,” New York Fed President John Williams told a conference in New York, according to prepared remarks. “Growth has remained solid, supported by robust consumer spending.”
“From where we are now, a number of signs indicate that inflation will continue to move toward our two percent longer-run goal,” added Williams, a permanent voting member of the US central bank’s rate-setting committee, referring to the Fed’s long-term inflation target. But, he noted, “it will take time before we can achieve that target on a sustained basis,” adding he did not expect inflation to reach the Fed’s two percent target this year.
Williams joined his colleagues last month to vote for a pause in cuts after three straight rate reductions, holding the Fed’s key lending rate between 4.25 and 4.50 percent. The Fed’s short-term federal funds rate influences borrowing costs for consumers and businesses, affecting the price of everything from mortgages to car loans.
Williams warned that, despite the strong fundamentals, “the economic outlook remains highly uncertain, particularly around potential fiscal, trade, immigration, and regulatory policies,” a passing reference to some of US President Donald Trump’s policies.
Since taking office last month, Trump has threatened to impose tariffs on US allies and top trading partners including Mexico, Canada, and the European Union, and imposed a sweeping 10 percent duty on goods from China — the world’s second-largest economy. He has also said he wants to carry out the largest program of mass deportation of illegal immigrants in American history, something many economists have said could hurt growth.
People in Trump’s orbit insist that, properly implemented, any negative impact from his tariff and immigration plans should be more than offset by a deregulation and tax-cutting agenda, which they see as pro-growth and anti-inflation.
© 2024 AFP
