New York Fed's Williams warns of 'headwinds' from record government shutdown

By The FedFOXBusiness

Federal Reserve vice chairman: US economy has momentum, Fed can be ‘patient’ in 2019

FBN’s Edward Lawrence and MarketWatch markets editor Mark DeCambre discuss Federal Reserve Vice Chairman Richard Clarida's comments about the health of the U.S. economy.

Federal Reserve Bank of New York President John Williams warned on Friday that the longest partial government shutdown in U.S. history is starting to create “emerging headwinds” to economic growth.

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While speaking at the New Jersey Bankers Association’s economic leadership forum, Williams, a voting member of the Federal Open Market Committee this year, called for an approach of patience, prudence and good judgment in the face of a softer economic outlook.

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The Fed, Williams said, is “seeing some emerging headwinds to growth from the partial government shutdown in the United States and elevated geopolitical uncertainties abroad” -- and is responding to the outlook of slowing growth “carefully.”

If growth is stronger than expected, however, Williams said it’s likely that “somewhat higher interest rates” will be called for at some point. In 2018, policymakers at the U.S. central bank voted to hike the benchmark federal funds rate four times, and in 2017, they voted to do so three times.

Williams is the latest Fed president to signal a dovish approach to interest rates in 2019, on the heels of a tumultuous month for the stock markets and concerns over a nearly year-long trade war between the U.S. and China.

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As the shutdown is inching toward its fifth week, the White House has re-evaluated the toll it could have on the economy.

On Tuesday, a senior official for the Trump administration forecast the partial shutdown would subtract about 0.13 percentage points from growth every week, double the White House’s original estimate.

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