09:32 AM EDT, 03/21/2025 (MT Newswires) -- There is a high degree of uncertainty in the economic outlook, but monetary policy is well-positioned no matter how the situation evolves, New York Federal Reserve President John Williams said Friday at Macroeconometric Caribbean Conference.

"There is certain uncertainty in monetary policy," Williams said. "The current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our 2% goal. It also positions us well to adjust to changing circumstances that affect the achievement of our dual mandate goals."

Williams added that he remains committed to supporting the Fed's dual mandate of supporting maximum employment while lowering inflation to its 2% goal.

While inflation expectations in the near term have been rising due to concerns about the impact of tariffs, those effects are expected to moderate over time based on New York Fed data.

"This analysis indicates that households expect an inflation shock will gradually decay over the ensuing years," Williams said. "In particular, although inflation shocks are expected to have persistent effects on inflation, these effects are anticipated to largely dissipate after five years. Importantly, there are no signs of inflation expectations becoming unmoored relative to the pre-pandemic period."

At the same time, Williams expects a slowdown in US economic growth in line with the updated forecasts in the Summary of Economic Projections, but there is a wide range of possible outcomes.

"I expect GDP growth this year to step down from last year's pace in part because of a slowdown in labor force growth due to lower immigration rates," Williams said. "But it's hard to know with any precision how the economy will evolve. Uncertainty is high, and there are many scenarios that could play out, depending on fiscal and trade policies and geopolitical and other developments."

The Federal Open Market Committee decided this week to maintain its current range for the federal funds rate at 4.25% to 4%, but did slow the pace in the rundown of its Treasury securities holdings.

"This week's decision to slow (the pace of runoffs) further is a natural next step to smooth the transition from abundant reserves to a level that is somewhat above ample," Williams said. "This action has no implications for our intended stance of monetary policy and should not affect the size of our balance sheet over the medium term."

The New York Fed President is a permanent voter on the Federal Open Market Committee.

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