① New York Fed President John Williams stated that the risks posed by rising energy prices to inflation and employment are “balanced,” and he still favors keeping interest rates unchanged; ② Williams believes that losses in the non-bank lending sector will not trigger systemic risks, although some investors are demanding early redemptions.
On Thursday (2nd) local time, New York Fed President John Williams said that the risks brought by rising energy prices to inflation and employment are “balanced,” and he still prefers to keep interest rates unchanged.
In a recent interview, he stated, “Based on the measures we took last year and our current situation, monetary policy is actually well-positioned to balance these risks, and this is precisely what we need to do.”
As the President of the Federal Reserve Bank of New York, Williams serves as the Vice Chairman responsible for setting interest rate policies on theFederal Open Market Committee(FOMC) and holds a permanent voting right, similar to the Federal Reserve Governors, and is considered the 'third-ranking official' in the Fed.
At last month’s interest rate meeting, the Federal Reserve decided to “stand pat” and is currently working hard to assess the impact of soaring energy prices on inflation and economic growth. On Monday this week, Federal Reserve Chair Jerome Powell also stated that monetary policy is currently in a favorable position to evaluate the impact of the war in Iran on the economy.
This is already the second time this week that Williams has expressed his support for “standing pat.” On Monday this week, during a public speech, he said, “The current situation is quite unusual. However, the current stance of monetary policy can effectively balance the risks associated with achieving full employment and price stability objectives.”
Although there is 'high' uncertainty regarding the inflation outlook, according to Williams, "developments in the Middle East leading to a sharp rise in energy prices could push up overall inflation in the coming months. However, if oil prices retreat after the conflict ends, some of the impact may reverse later this year."
Earlier on Thursday, Dallas Fed President Lorie Logan said that the U.S.-Iran war has heightened the risks of a resurgence of inflation and a weakening labor market.
“This conflict has increased uncertainty about the economy and our outlook. It complicates our work because it increases the risks to our dual mandate,” she added.
Private credit will not trigger systemic risks.
In the above-mentioned latest interview, Williams also stated that he believes losses in the non-bank lending sector (i.e., private credit) will not trigger systemic risks, despite some investors demanding early redemptions. Williams said that this is mainly due to the repricing of underlying loans.
"I don't believe this poses a systemic risk to our system at the moment," he said, noting that policymakers are "closely monitoring" the exposure of banks.
When asked whether some private credit funds could be considered 'too big to fail,' he replied, "Absolutely not."
Editor/Doris