Fed’s Williams is not in a rush to raise interest rates — or cut them

“From my perspective, monetary policy is in a good place. We’ve got policy where we need to be,” Williams said.

Whether the Fed needs to push rates higher and how long it needs to keep its restrictive stance is going to depend on the data, Williams said.

“Because we have monetary policy, in my view, in a restrictive stance and definitely influencing the economy in the right direction, I don’t feel we need to take immediate action or specific action,” he said.

The Fed’s target range is now between 5.25% and 5.5%, the highest level in two decades.

The median forecast of Fed officials, produced in June, included one 25-basis-point hike.

Some economists think the Fed will hold policy steady at its September meeting and then hike rates again at its meeting in November. But many others think the Fed is finished raising interest rates.

Traders in derivative markets see almost a 90% chance that the Fed holds steady after the next meeting, scheduled for Sept. 19-20. They see chances of another hike this year at about 30%.

In the interview, Williams said the Fed is trying to make sure that inflation comes down but is keeping an eye on policy to make sure it doesn’t weaken the economy too much.

He said the totality of the economic data was “moving in the right direction” at the moment.

Tim Duy, chief U.S. economist at SGH Macro Advisors, thinks that the data will be strong enough for the Fed to deliver another rate hike this year “but that case will take some time to develop.”

Asked about his criteria for cutting rates next year, Williams said that if inflation comes down as forecast, then the Fed will have to cut rates, because holding them steady would be an inadvertent tightening of policy.

The markets have the first rate cut priced in for March.

Stocks
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SPX
were higher on Monday, while the the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
ticked up to 4.07%.