New York Fed President Williams about the state of the economy
“But if you read all that noise in the first quarter, we still see a very good underlying growth in the economy. If you look at Q1 and the data until April, it is very encouraging,” Williams said during the Mortgage banking association (MBA) ‘s Secondary and Capital Markets Conference in New York City on Monday.
“The big question is, what will happen next? The keyword for the economy is ‘uncertainty’. There is uncertainty about trade policy, about geopolitical events, about tax policy – and that is all playing by business people through business people, households and, of course, markets.”
In the generally expected decision on May 7, the Federal Reserve kept the interest rates stable at a range of 4.25% to 4.5% after the two -day meeting.
According to Williams, business Surveys have shifted “from a position from optimism to worries – especially around rates.” In the meantime, the trust of the household has taken on the basis of the New York Fed study, with greater concerns about unemployment.
To withdraw to interest rates, monetary policy makers must see that this reflects sentiment in hard data, which can take time. Many managers and households are currently in “wait -and -see mode”, Williams added.
But he excluded a recession for 2025. “My opinion is that the economy will probably slow down this year with regard to last year’s growth, but not something worse than that.”
In the current state of the American economy, Williams said that the labor market stays strong with the unemployment rate at 4.2%, “fairly close to what most economists regard as full employment.”
In the meantime, inflation continues to relieve ‘slowly, gradually’, just above the 2% long-run goal of the FED. Williams also noted that delinquency rates for credit cards and car loans return to “more normal levels” after the expiry of stimulus programs from the COVID era.
The mortgage room
In the current environment, Williams said that the Fed will continue to reduce her of the effects (MBS) holdings set by mortgage “in a predictable, gradual way those markets can absorb.”
“We have been shrinking our balance for more than two years,” said Williams, adding that the Fed still “has a way” and the MBS portfolio will lower organically. So far, the FED has reduced its MBS companies by $ 15 billion to $ 20 billion a month.
Regarding the recent volatility in the Treasurys market – partly powered by rates – Williams noted that many international investors ‘have been invested heavily in American assets’. He emphasized that the American economy remains dynamic and attractive and said that “many worldwide investors continue to see the United States as a great place to invest, also in Treasurys, MBS and other assets with fixed -income income.”
But he also acknowledged that some investors re -assess their strategies in the midst of policy security.
“What I see is a broader picture of people who think about volatility in these markets and where they want to invest,” while they absorb news about tax policy and the current trade war.
On the housing market, Williams said that there is a “huge imbalance between supply and demand” that stimulates challenges for affordability.
“Many of these problems are actually more at a state and local level,” he said, adding that civil servants should find ways to “create more space for the supply of home, because I believe that the demand is clear.”
