The U.S. economy is starting to show some initial signs of increased activity as businesses reopen as the coronavirus pandemic recedes, said New York Federal Reserve President John Williams on Wednesday.
“I think we’re kind of in a good place…maybe near the bottom in terms of the economic downturn and, hopefully, we’ll start seeing improvement in coming months,” Williams said, in an interview on Bloomberg Television.
“We are seeing people willing to travel a little bit more, we’re seeing retail sales pick up some, especially in areas where restrictions have been lifted,” he added.
WIlliams said he expects to see a significant rebound in the second half of the year.
Asked if the worst was over, Williams replied “we’re pretty close.”
“Maybe May or June will be the low point,” he added.
Williams said he expects inflation to remain low over the next year or so.
The coronavirus pandemic is still driving the outlook, and as a result, things remain unclear, Williams said.
Fed officials will meet next on June 9-10 to consider monetary policy. As president of the New York Fed, Williams always has a vote on interest-rate decisions.
In the interview, Williams said the Fed will prepare a baseline economic forecast for the June policy meeting but is also considering alternative scenarios, both positive and negative.
Pressed on whether yield curve control was a policy tool the Fed might deploy soon, Williams replied it could “potentially” complement existing Fed tools.
Yield curve control is the term for capping interest rates beyond short-term maturities. It has been used by the Bank of Japan.
First mentioned by Fed officials in February, the policy has been getting more attention as the crisis has progressed. Fed officials discussed using the tool at their meeting in late April, minutes of the meeting revealed.
Based on comments from Fed Vice Chairman Richard Clarida last week, Fed watchers think that the issue won’t move to the front-burner until September.
Read:Fed’s Clarida says changing interest-rate guidance is a question for ‘down the road.’
Williams said what tools the Fed decides to use depends largely on how the economy evolved.
“These are issues that we’re obviously studying very carefully and we’ll be discussing as a group, so I don’t have anything to say about what will and will not happen,” the New York Fed president said.
Guy LeBas, chief fixed income strategist at Janney Capital Management, said on Twitter that the bond market translates Williams “thinking about it” into a policy decision.
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