NEW YORK (Reuters) - New York Fed President John Williams on Tuesday said he was comfortable with the level U.S. interest rates are at now and that he sees no need to raise them again unless economic growth or inflation shifts to an unexpectedly higher gear.
In an interview with Reuters, Williams estimated the Federal Reserve would continue trimming its bond portfolio well into next year. He also said he felt rates had reached his current view of a lower “neutral” level, with growth and unemployment leveling off and inflation, if anything, a bit weaker than hoped.
Asked if it would take some sort of shock to resume rate increases, he said it would require one or more of those factors to surprise to the upside.
“I don’t think that it would take a big change, but it would be a different outlook either for growth or inflation” to return to hiking rates, Williams, one of the Fed’s three vice chairs and a key voice on rate policy, told Reuters.
Williams’ comments, made just weeks after the U.S. central bank paused its once quarterly rate hikes, underscore just how high the bar would be for tighter monetary policy, and suggest that such a move may not come anytime soon.
The Fed could also keep levels of bank reserves on its books that are far closer to current levels than previously thought, Williams said.
Along with its rate-hike holiday, Fed policymakers are finalizing plans on how they would end the reduction of their balance sheet, which includes holdings of bank reserves bulked up in part by the Fed’s need for cash to buy bonds to halt the global financial crisis a decade ago.