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New York Federal Reserve Bank President John Williams stated
that he still expects one more interest rate hike this year but sees no need for further increases in 2027. According to him, underlying disinflationary processes remain intact, despite pressure from energy prices and investments in artificial intelligence.
"My view hasn't changed: one more rate hike might be appropriate," Williams said Tuesday in an interview with Bloomberg at the New York Fed. "I don't think I have any reason right now to believe that more will be needed."
Williams expects inflation to slow "significantly" over the coming year. In his view, recent price pressures driven by tariffs, energy costs, and AI-related demand have not fundamentally altered the disinflationary trend.
While acknowledging that investments in AI infrastructure are generating unusually high demand in specific sectors of the economy, Williams emphasized that policymakers should focus on broad conditions rather than isolated pockets of pressure.
"Overall, this is not an overheated economy," he said, adding that underlying inflation measures have declined.
Williams also defended the Fed's decision to raise rates by a quarter percentage point in September, noting that two months of economic data were sufficient to clarify underlying trends. He cautioned that the outlook remains uncertain and that policymakers must continue to monitor incoming data.
"It's only mid-October," Williams said. "There are many different factors affecting this economy, and we just need to keep watching the data."