NEW YORK (Reuters) - New York Fed President John Williams said Wednesday that monetary policy is in a good place to support the economy and he expressed an optimistic outlook for 2020.
“I feel very good about how the economy’s been this year, how it’s progressed and feel very good about how it’s going to look next year,” Williams said in an interview with CNBC.
The policymaker said he expects the U.S. economy will grow by about 2% next year, the unemployment rate will stay close to 3.5% and inflation will approach the Federal Reserve’s 2% target.
Fed officials voted unanimously to leave interest rates unchanged at last week’s policy meeting. Williams says future rate decisions will be data dependent and echoed the views expressed by some of his peers this week that interest rates are in a sweet spot heading into next year and that it would require a material change to the outlook for officials to either raise or lower borrowing costs.[nL1N28R1A1]
Williams praised the central bank’s efforts to calm money markets after a liquidity crunch in mid-September caused short-term borrowing rates to spike above the Fed’s target range.
The Fed is injecting billions of dollars of liquidity into overnight lending markets through operations in the market for repurchase agreements, or repo. And since mid-October, the Fed has been purchasing $60 billion a month in short-term Treasury bills to increase the size of the balance sheet and boost the level of reserves in the banking system.
Asked if regulations should be adjusted to ease repo market stress, Williams said his focus is on carrying out monetary policy. He said it is possible some pressure may emerge over the next couple of weeks but added that the Fed is ready to keep markets running smoothly.
“Typically at the end of the year there are pressures that move certain repo rates and interest rates around for various reasons. I’m guessing that that will happen this year as well,” he said.
“But we are in a very good position in terms of providing liquidity, providing reserves to the system and importantly, keeping the federal funds rate in the range through the year end.”
Reporting by Jonnelle Marte; Editing by Chizu Nomiyama