Fed's Williams says rate policy must be patient, data dependent

SOMERSET, N.J. (Reuters) – The U.S. Federal Reserve must be patient and guided by data when considering whether to raise interest rates, New York Fed President John Williams said on Friday, in remarks reinforcing the central bank’s commitment to a wait-and-see approach.

Williams said inflation pressures remain mild yet the economic “tailwinds” that boosted the economy in 2019 “have lost their gust,” including due to an ongoing partial shutdown of the U.S. government.

If those pressures cause the economic outlook to deteriorate, the Fed could pause rate hikes or adjust the path of balance sheet normalization, Williams said.

“The approach we need is one of prudence, patience, and good judgment – the motto of ‘data dependence’ is more relevant than ever,” he said in remarks prepared for delivery to the New Jersey Bankers Association.

“If growth continues to come in well above sustainable levels, somewhat higher interest rates may well be called for at some point. However, if conditions turn out to be less robust, then I will adjust my policy views accordingly.”

The remarks come as Fed policymakers have signaled a willingness to wait to deliver more rate hikes until they have a better handle on whether slowing global growth and financial market volatility will undercut an otherwise solid U.S. economic outlook.

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