The "interest rate cut dream" has been shattered! The Federal Reserve's "top three officials" delivered two consecutive signals this week: leaning towards holding steady.

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Source: Caixin (China Financial Network)

On Thursday (the 2nd), New York Fed Chair William Williams said that the risks to inflation and jobs brought by higher energy prices are “in balance,” and he still leans toward keeping interest rates unchanged.

In the latest interview, he said, “Based on the measures we took last year and where we are right now, monetary policy can actually balance these risks well—this is what we need to do.”

As New York Fed Chair, Williams serves concurrently as the vice chair responsible for setting interest-rate policy at the Federal Open Market Committee (FOMC), and like a Fed governor has permanent voting rights. He is seen as the Fed’s “number three” figure.

At last month’s policy meeting, the Federal Reserve decided to “hold steady,” and it is currently working to assess the impact of the surge in energy prices on inflation and economic growth. On Monday, Fed Chair Jerome Powell also said that monetary policy is currently in a favorable position and can be used to evaluate the impact of the Iran war on the economy.

This is already the second time this week that Williams has indicated his support for “holding steady.” On Monday, in a public speech, he said: “The current situation is indeed rare. But the current stance of monetary policy can balance well the risks faced in achieving our goals of maximum employment and price stability.”

Although there is “a high degree” of uncertainty in the inflation outlook, according to Williams, “developments in the Middle East have led to a significant rise in energy prices, which may push overall inflation higher over the coming months. However, if oil prices fall after the conflict ends, some of the impact may be reversed later this year.”

Earlier on Thursday, Dallas Fed Chair Lorie Logan said that the Iran–U.S. war has increased the risk that inflation will make a comeback and that the labor market will weaken.

“This conflict has increased our uncertainty about the economy and the outlook. It makes our work more complex because it increases the risks to our two-way mandate.” She added.

Private credit will not trigger systemic risk

In the latest interview above, Williams also said he believes losses in the non-bank lending sector (i.e., private credit) will not trigger systemic risk, even though some investors are demanding early redemptions. Williams said this is mainly due to the repricing of underlying loans.

“I don’t think this will pose systemic risk to our system at present,” he said, pointing out that policymakers are “closely monitoring” each bank’s risk exposures.

When asked whether certain private credit funds can be considered “too big to fail,” he replied that “absolutely not.”

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责任编辑：朱赫楠