New York Fed President John Williams reiterated that monetary policy remains appropriately calibrated, but left the door open to additional rate cuts if inflation continues to moderate. He said “further reductions in the federal funds rate will eventually be warranted” to avoid unintended tightening should price pressures follow the expected path lower.
Williams projected US economic growth of 2.5% this year, supported by fiscal stimulus, favorable financial conditions and ongoing artificial intelligence investment. He described the labor market as stable in a low-hire, low-fire equilibrium, with unemployment expected to drift lower over the coming year and into 2027.
While acknowledging that tariffs have contributed meaningfully to inflation this year, Williams expects their influence to diminish as the year progresses. He sees PCE inflation easing to around 2.5% in 2026 before returning to the Fed’s 2% goal in 2027.
He also noted that the costs of import tariffs are overwhelmingly absorbed domestically rather than by foreign producers.
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