New York Fed President John Williams warned that rising energy prices are already feeding into inflation, as the Iran War pushed up costs across the economy. He noted that “developments in the Middle East are driving significant increases in energy prices,” with effects now visible not only in fuel but also in airfares, groceries, and other consumer goods.
Williams emphasized that the shock carries two-sided risks. While energy prices could ease if supply disruptions are resolved, he cautioned that the conflict could evolve into a broader supply shock that “simultaneously raises inflation… and dampens economic activity.” This dynamic, he said, “has begun to play out already,” highlighting early signs of stagflationary pressure.
Despite these risks, Williams struck a measured tone on policy. He said monetary policy is “well positioned to balance the risks” to both inflation and employment, without signaling any immediate shift in direction. While acknowledging that the outlook is “highly uncertain,” he maintained expectations for solid growth of 2%–2.5% this year, with inflation around 2.75%–3% before gradually returning to target by 2027, supported by stable longer-term inflation expectations.
