Back
Williams says tariff inflation has mostly passed, sees AI demand pressure

Williams says tariff inflation has mostly passed, sees AI demand pressure

The New York Fed president said rates are well positioned but could rise if inflation fails to return to 2%, while market pricing now reflects a higher chance of another hike by year-end.

Fact Check
The primary Reuters full-text transcript and its companion Reuters story both confirm every element of the claim. Williams said tariff effects have largely passed through (mostly done), his base case assumes energy prices have peaked, AI-related demand is pushing up certain goods prices and is being watched, and the funds rate is 'well positioned' but the Fed will act/raise rates if inflation does not move back to 2%. The Yahoo Finance mirror corroborates identically. No conflicting evidence found.
    Reference: 123
Summary

John Williams said inflation pressures should gradually ease as energy prices and trade tariffs have peaked, but he also warned that further rate increases would be appropriate if inflation is not on track to return to the Federal Reserve's 2% target. The New York Fed president said the current policy stance is "well positioned" and that he strongly supported last week’s Federal Open Market Committee decision to leave the federal funds target range unchanged at 3.50% to 3.75%. Williams said he expects inflation to slow in the second half of this year and fall further next year, while he watches core inflation data to judge whether the economy is moving toward a durable return to 2% by 2028. He said the main inflationary forces from the past year and a half are fading, though prices still face support from supply shocks, including the war in Iran and Trump’s tariffs, as well as demand linked to heavy corporate investment in artificial intelligence. Rate-swap traders are now pricing in much of the chance of a Fed rate hike by year-end.

Terms & Concepts
  • FOMC: Federal Open Market Committee, the Fed panel that sets interest rates.
  • core inflation: An inflation measure that strips out more volatile items to show underlying price trends.
  • rate-swap traders: Market participants who trade interest-rate swaps and help reflect expectations for future policy moves.