New York Fed President John Williams said in an interview with The New York Times that he still expects interest rates to be lower by year-end, but emphasized that the pace and extent of easing will depend on incoming data.
When asked about the possibility of two additional 25bps reductions, Williams said that would depend on whether inflation and employment evolve broadly in line with his outlook. He expects inflation to “move up a bit to around near 3%” and unemployment to edge slightly higher, in which case “policy should evolve the way we expect.”
But he warned against complacency, noting that it would be “very damaging to the economy and the Fed’s credibility” if inflation were allowed to rise well above 2% without action.
Williams downplayed fears that President Donald Trump’s tariffs were fueling persistent inflation. He estimated the measures have lifted the price level by only 0.25 to 0.5 percentage point, adding that “underlying inflation seems to be moving gradually lower toward 2%.” He also said there were no signs of second-round effects, suggesting tariffs are having limited spillovers on broader price dynamics.
At the same time, Williams pointed to rising downside risks to employment, which he said were offsetting some of the upside risk to inflation.
