Federal Reserve Bank of New York President John Williams said on Thursday that while inflation pressures are likely to moderate this year they remain too high, as he pushed back his expectation of getting inflation back to the Fed’s 2% target.
“On the price stability side of our dual mandate, inflation is unquestionably elevated and well above the (Federal Open Market Committee’s) longer-run goal of 2%” and “it is imperative that we restore it to our 2% longer-run goal on a sustained basis,” Williams said in the text of a speech.
The New York Fed said that Williams would not deliver his remarks in person as had been originally planned.
Williams, who was making his first public comments since last week’s interest rate-setting Federal Open Market Committee meeting, said that when it comes to getting inflation back to the target, “the current stance of monetary policy is well positioned to do that.”
Last week, the Fed left its interest rate target range unchanged at between 3.5% and 3.75%, as new Chairman Kevin Warsh declined to provide any guidance about where rates might head in the future, as he sought to allow markets to form their own opinion about the outlook.
Williams said “in coming quarters” inflation pressures should moderate as the impact of tariffs driving up prices has run its course. At the same time, a swift resolution of disruptions tied to the Middle East conflict can also help inflation pressures come down, as moderating housing inflation also helps lower price pressures.
Data released on Thursday showed that on a year-over-year basis the Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose by 4.1% in May, a reading strong enough that it helped buttress market expectations that the Fed will have to raise interest rates at some point.
Williams said inflation should cool to 3.5% by year-end, getting on a “glide path” to 2% next year. But while in early May he said he saw inflation reaching the Fed's goal next year, on Thursday he said he expects prices to “land on target in 2028.”
Williams said the economy has been resilient against war-related shocks and that he expects growth to come in around 2.25% over this year and the following two years. Against the current unemployment rate of 4.3% in May, the Fed official sees that measure coming down to 4% in 2028.
That said, “substantial risks remain,” Williams said. AI-related investment may push up prices and “the global supply disruptions stemming from the conflict in the Middle East remain a source of risk to both the growth and inflation outlooks.”
