New York Federal Reserve President John Williams on Friday stressed the uncertainty of the US economic outlook, saying he expects lower growth this year amid a lot of unknowns about the impact of new trade, fiscal, and immigration policies.
"It's hard to know with any precision how the economy will evolve," Williams said in a speech at the Macroeconometric Caribbean Conference in the Bahamas.
"Uncertainty is high, and there are many scenarios that could play out, depending on fiscal and trade policies and geopolitical and other developments."
The comments came after the Fed held interest rates steady Wednesday for the second meeting in a row and maintained a prior prediction for two rate cuts at some point this year.
What the central bank did change, however, was its outlook on inflation (higher) and economic growth (lower), with Fed Chair Jerome Powell saying that a driving reason for the change was uncertainty stemming from Trump's plans for an aggressive slate of new tariffs on top of new duties already imposed on China, Canada, and Mexico.
Read more: The latest news and updates on Trump's tariffs
Powell raised eyebrows on Wednesday when he said his "base case" is that any higher inflation from tariffs will prove transitory, reviving memories of the Fed's slow response to inflation coming out of the pandemic and sparking questions of whether the Fed could repeat the same mistake.
But Williams said on Friday it's unclear whether the effects will prove to be transitory this time around, noting that it really depends on the different circumstances and the details.
"Tariff direct effects might be short-lived, but we have to be looking at more at what's happening in the economy ... and kind of adjusting our view on the path of policy based on what we're learning along the way," Williams told Yahoo Finance during a media availability on Friday.
To bolster his point about the uncertainty ahead for the economy, Williams on Friday noted that the Fed officials' new estimates for GDP growth range between about 1.5% and 2%. For inflation, the range is between about 2.5% and 3%, noting that any of those are possible.
Williams anticipates lower immigration will constrain the increase of workers in the job market, putting a damper on growth. And while inflation has continued on a "bumpy path" toward the Fed's 2% goal, he noted the future is highly uncertain.
The New York Fed president characterized the current level on the Fed's benchmark interest rate as "modestly restrictive," noting that the current range of 4.25% to 4.5% is "entirely appropriate" given the "solid" labor market and inflation still running "somewhat" above the Fed's 2% goal.