New York Fed President John Williams on Monetary Policy, Economy, and Fed Chair Race

Monetary Policy Outlook

• 🎯 Monetary policy is described as well-positioned heading into 2026, according to New York Fed President John Williams.
• ⚠️ Downside risks to employment have increased, while upside risks to inflation have lessened somewhat.
• ⚖️ It is imperative for the Fed to restore 2% inflation without increasing risk to employment.

Economic Forecast and Tariffs

• 📈 The US economy has shown considerable resilience, with upgraded forecasts seeing 2.25% GDP growth next year, up from 1.5% this year.
• 📉 Unemployment is expected to gradually decline over the next few years, with inflation below 2.5% next year.
• 💰 Tariffs are expected to have a one-off effect on the price level, contributing an estimated half a point to overall inflation, though effects have been more muted and drawn out than anticipated.

Fed Chair Race Dynamics

• 🗣️ There has been pushback communicated to the administration regarding Kevin Hassett as a potential Fed chair candidate.
• 🤝 Some individuals are promoting Kevin Worsh as an alternative, with this feedback communicated through various channels.
• 📉 Market participants are reportedly discussing the potential impact of the Fed chair choice on interest rates with the president, emphasizing the desire for lower rates.
• 📊 The bond market is expected to remain a significant factor, influencing any Fed chair's decisions regarding interest rates.
• ❓ The status of Fed Governor Chris Waller's interview for the position remains unconfirmed.