Williams says no rate change needed; tariffs spur policy rift.

John Williams,World's largest foreign exchange President of the Federal Reserve Bank of New York, stated on Thursday that despite tariffs potentially having a negative impact on the economy, there is currently no need to immediately adjust interest rate policy. This stance underscores the Fed's effort to maintain monetary policy independence amid policy pressures from the Trump administration.

In a recent interview, Williams stated that the Fed's current policy setting is "well-positioned," and there is no need for an adjustment to the federal funds rate in the short term. As Vice Chairman of the Federal Open Market Committee (FOMC), Williams holds a permanent voting position on rate decisions, and his remarks are seen as an important indicator of the Fed's stance.

He noted that the U.S. economic outlook is filled with uncertainty, and the upward inflationary pressure from the Trump administration's recent significant increase in import tariffs cannot be ignored. Williams warned that the unemployment rate could rise from the current 4.2% to the 4.5% to 5% range, and economic growth may slow to below 1%.

"This is not a recession, but the growth rate will slow significantly compared to recent years," he pointed out. The cost increases due to tariffs will pressure prices, and the Fed must prevent this one-time price hike from evolving into long-term inflation.

He emphasized that the Fed's primary task remains controlling inflation expectations and stabilizing the inflation rate at the 2% target level. "We cannot allow short-term shocks to alter long-term expectations."

Just a day before Williams made his comments, Federal Reserve Chairman Jerome Powell also expressed concerns about tariff policies. He noted that tariffs could raise prices and hit employment, and the Fed will decide in the future whether to adjust interest rates. However, this stance quickly drew strong dissatisfaction from President Trump.

Trump again criticized Powell on social media, calling him "too slow, always wrong," and criticized his latest report as "a mess." He even stated that "Powell's removal can't come fast enough," suggesting he might consider replacing him, despite legal controversy over whether the White House has the authority to remove the Fed Chairman.

Powell's term will continue until next year, and against the backdrop of current inflation above target and ongoing market turbulence, the Fed's policy path is facing significant pressure from the executive branch. Should there be excessive political interference, the Fed's independence and market confidence could be severely impacted.

Amid ongoing tariff pressure and unclear economic data, Fed officials currently choose to hold steady, continuing to observe the trends in inflation and growth. However, the divergence in policy direction between the White House and the central bank is becoming increasingly evident, and how the Fed will balance market stability against political pressure in the coming months remains a focal point of external attention.

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