Federal Reserve's third-in-command: Every meeting is a potentially substantive meeting for action, and the independence of the Federal Reserve is extremely valuable
The third-ranking official of the Federal Reserve, Williams, stated that each meeting is "real-time effective," implying policy flexibility. Although he did not explicitly support raising or lowering interest rates, he mentioned that the current interest rate level is "moderately tight." The unemployment rate is low, wage growth aligns with a robust labor market performance, and inflation is declining slowly. Williams emphasized the importance of the Federal Reserve's independence and did not comment specifically on the incident of Trump firing board member Lisa Cook. Investors are betting that the Federal Reserve will cut interest rates in September
On August 27th, Wednesday, the third-ranking official of the Federal Reserve and President of the New York Fed, Williams, stated in an interview:
"I do believe, from my perspective, that every meeting is 'live'. The risks are more balanced between employment and inflation. The Federal Reserve's policy meeting next month will be a 'live' meeting."
After Federal Reserve Chairman Powell stated last Friday that "the employment outlook faces increasing downside risks" and "the balance of risks has shifted, which may require an adjustment in policy stance," investors have been betting that the Federal Reserve will cut interest rates in September. Analysts noted that while Williams did not directly indicate support for either a rate hike or a rate cut, using 'live' (indicating that action could be taken at any meeting) suggests that the policy is flexible.
Williams also stated that the current level of interest rates is 'moderately restrictive,' which means that even if the Federal Reserve cuts rates, monetary policy will still have a certain degree of tightness in the short term. However, he emphasized that whether or not to cut rates ultimately depends on the actual economic developments.
Williams mentioned that the current unemployment rate remains low, and although indicators such as hiring show that the job market is gradually cooling, wage growth still aligns with a 'robust labor market' performance. Inflation, on the other hand, is declining 'rather slowly.'
Following Trump's announcement to fire Federal Reserve Governor Lisa Cook, Federal Reserve officials are facing increasing political pressure. The White House has accused Cook of mortgage fraud. Cook's lawyer stated that they will challenge this decision through legal proceedings. Williams declined to comment specifically on the incident but emphasized that Cook has always upheld integrity and remained loyal to the Federal Reserve's mission. He added:
"The independence of the Federal Reserve has proven to be extremely valuable globally."
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