NY Fed's Williams Says Inflation Could Finally Be Turning the Corner, But Warns the Fed Is Prepared to Act Again if It Doesn't Reach 2%
New York Fed President John Williams expects inflation to ease, potentially turning the corner, but warns the Federal Reserve is prepared to raise interest rates if necessary to return to the 2% target. While supporting the recent decision to hold rates steady, he emphasized vigilance on core inflation trends. Other Fed officials, including Cleveland's Beth Hammack and Minneapolis's Neel Kashkari, also urged continued focus on controlling inflation, with some advocating for gradual hikes to prevent entrenched price pressures.
New York Fed President John Williams said he expects inflation to continue easing but warned the Federal Reserve is prepared to raise interest rates if needed to bring inflation back to its target.
Williams told Reuters that inflation could ease if energy prices and trade tariffs have peaked and the economy remains resilient, as recent inflationary pressures fade and disinflationary trends re-emerge. The NY Fed Chief said he is closely watching core inflation over the coming months to determine whether it is on a sustained path toward the Federal Reserve’s 2% target by 2028.
“My forecast personally is for inflation to come down in the second half of this year and come down further next year,” he stated, while adding that the current Fed interest rate stance is "well positioned" to bring inflation back to target.
Williams stated that he "strongly … supported the decision of the committee" to hold rates steady.
He also said that it would be “appropriate” for the Fed to act if the economy is not on track to bring inflation back to its 2% target.
Add article title and URL
Officials Urge Inflation Vigilance
Last week, the Federal Reserve kept its benchmark interest rate unchanged at 3.50% to 3.75%.
Cleveland Fed President Beth Hammack said inflation has remained above the Fed’s 2% target for more than five years and is unlikely to return to that level without further central bank action. She warned that prolonged inflation would make it more difficult and costly to restore price stability. She said the Fed remains focused on controlling inflation, citing a strong labor market with unemployment near its maximum-employment level.
Meanwhile, Minneapolis Fed President Neel Kashkari backed gradual interest rate hikes, warning that acting early could prevent more aggressive tightening later. He also cautioned that recurring supply shocks risk entrenching inflation, drawing parallels to the 1970s and the Fed’s misreading of post-pandemic inflation as “transitory.”
Fed Chair Kevin Warsh said the Fed remains focused on returning inflation to its target, adding that one month of softer inflation had little impact on the decision to keep interest rates unchanged.
Image via Shutterstock
