Federal Reserve Bank of New York President John Williams spoke to a symposium at Princeton University's Griswold Center for Economic Policy Studies.

He said the process of reducing the size of the Federal Reserve's balance sheet could begin at the next meeting, May 3 & 4. The Fed holds around US$9 tn of Treasury bonds and mortgage-backed securities.

Williams cited

  • high inflation (running circa 6.5%, which is over 3x the Fed's 2% target) - said its the Fed's greatest challenge
  • "Uncertainty about the economic outlook remains extraordinarily high, and risks to the inflation outlook are particularly acute"

On an upbeat note, Williams said.

  • expects that rate increases and balance sheet reduction will help rduce inflation to around 4% this year
  • then "close to our 2% longer-run goal in 2024"
  • "These actions should enable us to manage the proverbial soft landing in a way that maintains a sustained strong economy and labor market"
  • "Both are well-positioned to withstand tighter monetary policy."
Fed Williams