The president of the Bank of the Federal Reserve of New York, John Williams, said Wednesday that monetary policy is in the right place to allow the Fed to monitor the economy before making its next decision, according to Reuters. Williams added that the impact of commercial tariffs is hardly beginning to affect the economy.
Outstanding comments
The current “modestly restrictive ‘monetary policy is appropriate.
The current status of the interest rates policy allows the Fed to analyze the data.
The impact of tariffs has been modest so far, but will increase over time.
Tariffs are expected to boost inflation a percentage point during the rest of 2025 to 2026.
It will be necessary to observe the data to understand the impact of tariffs.
It is ‘too soon’ to evaluate the impact of tariffs on the economy.
General inflation is probably located in 2.5% in June, and underlying inflation in 2.75%.
At this time, the economy is in a good position, the labor market is solid.
The growth of employment and labor offer are slowing down.
The economy is affected by greater uncertainty.
The US economy is expected to grow around 1% this year.
Unemployment will increase to 4.5% by the end of the year.
Inflation will be between 3% and 3.5% this year.
Inflation is expected to reduce 2.5% next year, and 2% in 2027.
Inflation has been moderated unequally, partly due to housing related factors. Without tariffs, inflation would be approaching 2%. It is not surprising that tariff impacts have been increasing. I am not surprised that tariff impacts have been modest so far. There has been good news about inflation in the services sector. The underlying disinflation process continues to occur. The labor market is in a mode of low hiring and low dismissal.
Market reaction
At the time of writing, the American dollar index (DXY) is quoting 0.02% higher in the day, reaching 98.30.
Fed – Frequently Questions
The monetary policy of the United States is directed by the Federal Reserve (FED). The Fed has two mandates: to achieve prices stability and promote full employment. Its main tool to achieve these objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the objective of 2% set by the Federal Reserve, it rises interest rates, increasing the costs of loans throughout the economy. This translates into a strengthening of the US dollar (USD), since it makes the United States a more attractive place for international investors to place their money. When inflation falls below 2% or the unemployment rate is too high, the Federal Reserve can lower interest rates to foster indebtedness, which weighs on the green ticket.
The Federal Reserve (FED) celebrates eight meetings per year, in which the Federal Open Market Committee (FOMC) evaluates the economic situation and makes monetary policy decisions. The FOMC is made up of twelve officials of the Federal Reserve: the seven members of the Council of Governors, the president of the Bank of the Federal Reserve of New York and four of the eleven presidents of the regional banks of the Reserve, who exercise their positions for a year in a rotary form.
In extreme situations, the Federal Reserve can resort to a policy called Quantitative Easing (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non -standard policy measure used during crises or when inflation is extremely low. It was the weapon chosen by the Fed during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy high quality bonds of financial institutions. The one usually weakens the US dollar.
The quantitative hardening (QT) is the inverse process to the QE, for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the bonds that it has in portfolio that they expire, to buy new bonds. It is usually positive for the value of the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
