2026-01-12 23:20:00
Summary:
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Williams declines comment on Fed investigations
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Describes Powell as leader of “impeccable integrity”
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Warns eroding Fed independence leads to bad outcomes
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Reaffirms confidence inflation will return to 2%
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Fed officials close ranks amid political pressure
New York Fed President John Williams forcefully defended Fed independence, backing Chair Powell and warning political interference would damage economic outcomes.
Federal Reserve Bank of New York President John Williams offered a robust defence of the U.S. central bank’s independence on Monday, warning that any erosion of that independence would result in “bad economic outcomes,” as political scrutiny of the Federal Reserve intensifies.
Speaking during a question-and-answer session following his prepared remarks, Williams declined to comment on any investigations involving the Fed, saying he could not speak to legal matters. However, he made clear his strong support for Fed Chair Jerome Powell, describing Powell as a leader of “impeccable integrity.”
Williams said he “fully agrees” with the importance of central bank independence, arguing that the ability of the Federal Reserve to set monetary policy free from political interference is essential for delivering stable economic outcomes. He warned that history shows undermining that independence leads to poorer growth, higher inflation volatility, and weaker labour market outcomes.
The comments come at a sensitive moment for the Fed, after Powell revealed the central bank had received grand jury subpoenas related to cost overruns on a headquarters renovation project — a move Powell characterised as a pretext to exert political pressure on monetary policy. While markets have so far reacted calmly, the episode has sparked bipartisan concern in Congress and drawn attention from ratings agencies and global investors.
Williams sought to steer the focus back to fundamentals, reiterating his confidence that the Fed will succeed in returning inflation to its 2% target. He said the central bank’s credibility, built over decades, remains intact and continues to anchor inflation expectations despite recent political noise.
His remarks reinforced the message from his earlier speech that policy is now close to neutral and well positioned, allowing the Fed to balance easing inflation pressures against rising downside risks to employment. Williams’ emphasis on institutional integrity adds weight to the Fed’s case for patience, caution, and data-driven decision-making at a time when political pressure for aggressive rate cuts is intensifying.
For markets, the message was clear: Fed officials are closing ranks around Powell and drawing a firm line around independence, signalling continuity in policy strategy despite an increasingly charged political backdrop.
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Williams spoke earlier:
In brief:
- said policy is now near neutral and well positioned, with inflation expected to return to 2% in 2027 and no near-term need for further rate cuts as labour risks rise
His comments reinforced expectations of a prolonged Fed pause, limiting near-term rate-cut pricing while anchoring medium-term disinflation and growth optimism.
