despite current conflicting factors such as tariffs and events in the Middle East, which are affecting price stability.

Speaking at the Staten Island Economic Development Corporation, Williams said inflation is currently hovering around 3%, with tariffs contributing between 0.5 and 0.75 percentage points to that figure. He noted that significant increases in energy prices as a result of events in the Middle East will likely push up overall inflation in the coming months, although these effects should partially offset later this year, assuming lower oil prices following the cessation of hostilities.

Williams expects overall inflation to be around 2.75% this year before reaching the Fed's 2% target by 2027. He stated that there are no signs of significant spillovers from the tariffs to the rest of the economy, and the labor market is not creating additional inflationary pressure.

Regarding the labor market, Williams described receiving mixed signals. The unemployment rate has fluctuated in a narrow range between 4.3% and 4.5% since July of last year, and jobless claims remain low. However, household expectations for the labor market are declining: perceptions of job availability, as published by the Conference Board, and job search expectations, as reflected in the Federal Reserve Bank of New York's Survey of Consumer Expectations, are declining.

Williams stated that the current monetary policy stance is well suited to balancing risks to the Fed's goals of maximum employment and price stability. At its most recent meeting, the Federal Open Market Committee decided to maintain the target range for the federal funds rate at 3.5% to 3.75%.

Williams expects real GDP growth to be around 2.5% this year, reflecting support from fiscal policy, favorable financial conditions, and investment in artificial intelligence. Given that growth is exceeding potential, he expects unemployment to decline slightly this year and next.