Federal Reserve Number Three Dismisses White House Pressure: Economic Outlook Positive, No Rush To Cut Rates

New York Federal Reserve President John Williams said on Monday that he expects the U.S. economy to sustain healthy growth in 2026 and indicated there is no immediate justification for lowering interest rates. In remarks prepared for delivery at the Council on Foreign Relations in New York, Williams observed that the Federal Open Market Committee has shifted policy from a moderately restrictive stance toward a level closer to neutral. He stated that monetary policy is well positioned to support labor‑market stability while guiding inflation back to the FOMC’s long‑run 2 percent objective.

Williams underscored that the Fed’s central task is to return inflation to 2 percent without imposing undue risks on employment. He noted that recent cooling in the labor market has increased downside risks to jobs while reducing upside risks to inflation. This address marked Williams’ first public speech of the year, coming after the Fed reduced its short‑term policy rate target by 0.75 percentage points last year, bringing the federal funds target range to 3.5 percent to 3.75 percent and initiating a period of policy observation.

The prior easing of short‑term borrowing costs was intended to balance the trade‑off between a softening labor market and inflation that remained above target. At the December meeting, Fed officials anticipated an additional rate cut this year, premised on expectations that transitory policy effects would abate and that labor‑market stability would help ease price pressures. Recent employment data, however, show subdued labor demand amid still‑elevated inflation.

Following last month’s policy meeting, Williams told a television interviewer he did not see an urgent need for another rate cut. Despite sustained pressure from the White House and its allies for substantial easing even while inflation exceeds target, other Fed officials have expressed similar views on the current policy stance. On Monday, growing numbers of congressional Republicans voiced concern about the administration’s threats to prosecute Federal Reserve Chair Jerome Powell.

Williams described his outlook as “quite optimistic,” projecting GDP growth of between 2.5 percent and 2.75 percent for the year, with the unemployment rate stabilizing in 2026 and declining thereafter. He expects price pressures to peak in the first half of the year in a range of 2.75 percent to 3 percent, to moderate to about 2.5 percent by year‑end, and to return to 2 percent in 2027.

Williams delivered these remarks amid unprecedented challenges to the Fed’s independence. Late last week, Chair Powell received a subpoena and faces criminal charges related to cost overruns on the Federal Reserve’s headquarters renovation. Powell responded in a statement characterizing the legal actions as a pretext and warning that the dispute concerns whether the Fed can continue to set rates based on evidence and economic conditions or whether monetary policy will be subject to political pressure and intimidation.

While the episode has not yet produced the extreme market disruption some feared, the threat of prosecution has prompted bipartisan pushback in Congress and could impede the administration’s ability to appoint new Fed governors until the legal actions are resolved.