John Williams, President of the Federal Reserve Bank of New York, has made his stance crystal clear: the U.S. labor market needs protection, and interest rate cuts are the right tool for the job. In a candid 45-minute interview with The New York Times, Williams laid out his economic outlook, concerns about data gaps due to the government shutdown, and why he believes the Fed must act now to prevent deeper damage .
Why John Williams Is Pushing for Rate Cuts
“We just need to stay focused on that and continue to be driven by the data,” Williams said, emphasizing that while inflation remains above the Fed’s 2% target, the bigger risk may now lie in a cooling labor market .
Williams noted that job openings and quit rates have declined steadily over the past year. Though the unemployment rate has only ticked up slightly—from historically low levels—it’s enough to signal a “gradual cooling” that could worsen without policy support.
John Williams on Inflation: Not Out of the Woods, But Headed in the Right Direction
Despite recent monthly inflation readings that appear to be moving away from the 2% goal, Williams insists the underlying trend is still favorable. He pointed to shelter costs—where new lease data has already shown declines—as a leading indicator that broader disinflation is on its way.
“Tariffs have boosted inflation by maybe a quarter to half a percentage point,” he acknowledged, but added that these effects now seem “more drawn out” and less likely to spiral into second-round price pressures.
Navigating a Data Blackout
With the U.S. government shutdown delaying the release of official jobs reports and other key statistics, Williams admitted the Fed is flying slightly blind—but not completely.
“I wouldn’t call it a data drought,” he said, listing alternative indicators the Fed is monitoring:
- Private-sector employment data (e.g., from payroll processors)
- Conference Board’s “jobs plentiful” survey
- Small business hiring difficulty surveys
- The New York Fed’s own Survey of Consumer Expectations
- Credit card and travel spending data
- ISM manufacturing and services indexes
“We have to look at the totality of the data,” Williams stressed—a mantra he’s repeated for years.
What’s Next for Interest Rates?
When asked directly if he supports two more rate cuts in 2025, Williams didn’t commit to a number—but his tone was telling.
“My own view is that yes, we would have lower rates this year,” he said, adding that the decision hinges on incoming data once the shutdown ends.
He framed recent and potential future cuts not as a reaction to weak growth, but as “risk management”—a way to balance the dual mandate of price stability and maximum employment.
The Neutral Rate Debate
Williams also weighed in on the long-running debate about the “neutral” interest rate—the level at which policy is neither stimulative nor restrictive. He estimates it’s “probably somewhat below 1%” in the long run, influenced by demographics, productivity, and fiscal policy.
While new Fed Governor Stephen Miran argues neutral may be even lower due to tariffs and immigration policy, Williams cautioned against overreacting to short-term shifts. “Neutral is your destination,” he said. “But the road you take depends on today’s conditions.”
Defending the Fed’s Independence
In a pointed response to political pressure—including President Trump’s attempts to remove Fed Governor Lisa Cook—Williams reaffirmed the central bank’s nonpartisan mission.
“We’re not political creatures,” he said. “We’re very nerdy. We’re analyzing the data.”
He warned that compromising the Fed’s independence would undermine its ability to fight inflation—a lesson learned from global history.
