New York Fed's Williams: Inflation Likely Past Its Peak, Policy 'In a Good Place'

BlockBeats reported that on July 15, New York Fed President John Williams said inflation at around 4% is "undoubtedly too high," but he sees mounting evidence that price pressures may have peaked and could ease gradually over the coming quarters. He added that the current stance of monetary policy is "in a good place." Williams laid out six factors supporting a more constructive inflation outlook: tariff-related price increases have largely worked through the system; housing inflation should keep trending lower; oil prices may already have topped out; AI-driven supply-demand imbalances could fade as capacity expands; the labor market is not adding fresh upward pressure on inflation; and long-run inflation expectations remain well anchored. He projects headline inflation to ease to about 3.25% by the end of this year and return to the Fed's 2% target by 2028. Williams also flagged risks that could complicate the path ahead, including renewed conflict in the Middle East adding uncertainty to energy prices, and the still-highly uncertain scale and duration of AI investment-related supply-demand distortions. On growth, Williams expects the U.S. economy to expand 2% to 2.25% this year. He sees the unemployment rate gradually edging down from 4.2% to 4% by 2028. After June CPI came in below expectations, markets have increased their bets that the Fed will leave rates unchanged at its July meeting. At the Fed's first meeting under Walsh, policymakers held the policy rate steady at 3.50% to 3.75%, though divisions were notable over whether another increase would be needed this year. Half of the Fed's 18 officials penciled in at least one 25-basis-point hike, while the other half expected no change. Walsh told a House hearing on Tuesday that June's inflation improvement does not mean the job is done. He said the July meeting will center on discussions about "how and when to use policy tools," and that decisions will continue to hinge on inflation data, energy prices, and economic growth.