John Williams from the Federal Reserve Bank of New York remarks on US economy, inflation and interest rates.
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Treasury and funding markets have performed very well.
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The standing repo facility is ready to manage liquidity issues if needed.
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There is still a very high level of reserves in the financial system.
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Interest rates will eventually be lower than current levels.
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No abnormal moves are seen in the bond market.
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The bond market is currently focused on economic fundamentals.
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The bond market appears relatively calm.
The Fed must keep the economy on track and allow tariffs to pass through.
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Tariff impacts are expected to play out into the middle of next year.
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Base case: tariffs will remain in place, though other scenarios are considered.
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Tariffs are likely to add 1%–1.5% to inflation this year.
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So far, tariffs don’t appear to be creating long-term inflation pressures.
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Clear signs that tariffs are influencing prices and consumer buying patterns.
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Core goods inflation has shifted higher due to tariffs.
Other indicators show that the services economy is normalizing.
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The overall trend in services inflation has been favorable.
Concern that the job market could cool more than desirable.
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Downside risks to employment have clearly increased.
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Balance has shifted more toward the Fed’s employment mandate.
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4.2% unemployment rate is relatively low, but risks to the labor market are rising.
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Job market turnover has cooled significantly.
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The labor market has been challenged by changes in immigrant labor supply.
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Labor market is still in a reasonably good place overall.
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Gradual cooling in the job market is expected.
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Labor market is moving back toward pre-pandemic trends.
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Labor market is currently in balance.
Consumers look a little shaky in soft survey data, but hard data does not show major weakness.
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Technology investment has been very strong.
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The supply side of the economy is shifting significantly.
Monitoring data closely for possible contraction in banking reserves.
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Always watching broader data trends, not just individual reports.
Inflation is expected to return to the Fed’s 2% target by 2027.
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PCE inflation forecast: 3.0%–3.25% for this year, 2.5% in 2026.
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The unemployment rate is expected to rise to about 4.5% next year.
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Trade and immigration factors are slowing economic activity.
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GDP is projected to grow between 1.25%–1.50% this year.
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