John Williams says the Fed may raise rates if inflation does not decline toward the 2% target by 2028 as projected.
Federal Reserve Bank of New York President John Williams stated that interest rate hikes remain an option if inflation fails to ease as expected. He forecasts inflation cooling in the second half of this year and continuing into 2025, aiming for the Fed’s 2% target by 2028. Current policy is deemed “well positioned” after last week’s decision to hold rates at 3.50%-3.75%.
The Fed’s preferred inflation measure, the personal consumption expenditures index, stood at 3.7% year-over-year in June, above the 2% goal for over five years. Williams emphasized that core inflation trends over the next few months will guide policy decisions, though he does not expect Middle East conflict to drive prices higher through 2026.
Williams supported the Federal Open Market Committee’s recent decision to maintain rates but warned that failure to progress toward 2% inflation would warrant action. He noted that a resolution to geopolitical tensions and normalized shipping lanes could further ease price pressures.