Fed’s Williams says one more rate hike likely this year, but no rush

Federal Reserve Bank of New York President John Williams said Tuesday the central bank can take time to review economic data before making its next interest rate decision, though he expects one additional increase before year-end.

Williams told an audience at the University of Buffalo in Buffalo, New York, that the Fed does not need to rush its next move following the September meeting’s actions. The central bank raised its overnight target rate range by a quarter percentage point to between 3.75% and 4% at that meeting.
“If the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target,” Williams said. He added that his forecast depends on incoming economic data.

Financial markets currently price in a strong possibility of a rate increase at the Fed’s October meeting, a timeline Williams appeared to question.

Williams said the Fed must ensure inflation returns to its 2% target on a sustained basis. The central bank has faced inflation pressures exceeding its target for over five years, with conditions worsening this year due to President Donald Trump’s trade tariffs and rising energy prices linked to conflict in the Middle East.

The New York Fed president noted that artificial intelligence investment is contributing to price pressures, though tariff-related inflation has mostly subsided barring new import taxes.

Williams projected inflation will reach approximately 3.5% by year-end, with price pressures easing in the following year before returning to target in 2028. He forecast economic growth at 2.25% this year and expects the unemployment rate to reach 4% next year.