Monetary Policy Is In A 'Good Place'

The Federal Open Market Committee can take the rest of the year off. Today, Federal Reserve Bank of New York President John Williams said: "Monetary policy is in a good place." He said so at the Semafor World Economy Summit in Washington. He added: "We've got interest rates in a place that is moving us gradually to our goals, so I definitely don't feel urgency to cut interest rates." In other words, the Fed is in no rush to lower interest rates. That was the theme of my March 25 FT article titled "The Fed should resist messing with success: If the economy is doing well with the current level of interest rates, why lower them?" At the time, the widespread consensus was four rate cuts this year.

Today, the 2-year Treasury note yield was 4.99%, implying one cut in the federal funds rate from a target range of 5.25%-5.50% to 5.00%-5.25% over the next 12 months (chart).