John Williams, president and chief executive officer of the Federal Reserve Bank of New York, speaks during an Economic Club of New York (ECNY) event in New York, US, on Thursday, Sept. 4, 2025.
David Dee Delgado | Bloomberg | Getty Images
New York Federal Reserve President John Williams said Friday he expects the central bank can lower its key interest rate from here as labor market weakness poses a bigger economic threat than higher inflation.
With divisions in the central bank running high over the future of rates, Williams took the side of the doves who still see policy as a bit restrictive when it comes to economic growth.
“I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions,” he said in remarks for a speech in Santiago, Chile. “Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.”
Williams’ comments helped move financial markets in several ways.
Stock market futures rose further into positive territory while Treasury yields were sharply lower.
At the same time, fed funds futures pricing for the next Fed move also tilted. Traders now see a better than 64% probability of another quarter percentage point reduction at the Dec. 9-10 meeting of the Federal Open Market Committee, and just a 36% chance of no cut. That’s about an exact flip of where expectations were Thursday at the same time.
Williams’ comments are significant in that he is considered part of a leadership troika that also includes Chair Jerome Powell and Vice Chair Philip Jefferson, who is due to speak Friday at 8:45 a.m. ET. Regional presidents Susan Collins of Boston and Lorie Logan of Dallas also are due to deliver remarks.
Fed sentiment has divided along the lines of officials who think policy is still somewhat restrictive, meaning there is more room to lower rates without spiking inflation, and those who view it as not restrictive, with further easing a threat to higher prices particularly in the era of dramatically higher tariffs on U.S. imports.
“My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat,” Williams said. “Underlying inflation continues to trend downward, absent any evidence of second-round effects emanating from tariffs.”
Williams did note, as have many other Fed officials, that progress on inflation “has stalled” due to the impact of tariffs and other factors. However, he noted that longer-run expectations are still in check, giving the Fed latitude as inflation gets back to the Fed’s goal, he projected, by 2027.
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