New York Federal Reserve President John Williams said he still believes one more rate hike this year is appropriate, but currently sees no need for further increases in 2027.
“I still think another hike is appropriate,” Williams told Bloomberg News in an interview on Tuesday at the New York Fed. “I don’t see any reason right now to believe we’ll need to take additional steps after that.”
Williams indicated that signs point to inflation slowing “significantly” next year as the effects of tariffs and energy price shocks fade, bringing it closer to the Federal Reserve’s 2% target. He noted that these signals, along with other indications of cooling underlying inflation, should help ease price pressures stemming from artificial intelligence infrastructure development.
His remarks align with the median forecast released by Fed officials following their September meeting, which included a 25-basis-point rate increase. However, several regional Fed presidents—including Cleveland Fed chief Loretta Mester and Dallas Fed chief Nellie Liang—have explicitly stated they believe more than one additional move will be needed to bring inflation back to 2%.
According to federal funds futures pricing, investors currently expect the Fed to raise rates in December and then two more times in 2027.
The New York Fed chief emphasized high uncertainty about the economic outlook and specifically noted he would continue closely monitoring the role of artificial intelligence in inflation.
“It’s only mid-October,” he said. “The economy is influenced by many different factors, and we can only keep watching the data.”
Policy makers will receive the latest report on consumer price inflation on Wednesday—the final update before their meeting on October 27–28.
Prior to the September rate hike, Williams was not among the most vocal advocates for tightening. But he said that after two factors altered the near-term inflation outlook, he became “firmly supportive” of the decision.
“I think we’ve seen another shock—or another manifestation of these developments—namely, a sharp rise in fuel costs,” he said.
Yet this did not change his long-term view on prices.
“I still believe there are deflationary pressures,” Williams said. “The impact of tariffs and energy prices is undeniable, and now AI is also having an effect. But I don’t think some of these factors signal rising underlying inflation. In fact, measures of core inflation have already declined.”
Still, Williams acknowledged that demand for AI infrastructure currently exceeds supply, and this imbalance may persist for some time.
“There’s a sub-sector of the economy that seems to be doing well and will likely continue so for a while—this is unusual,” he said. “But I think we should actually look at this through a broader lens of the overall economy.”
He also expressed optimism that AI will ultimately boost productivity, helping to rein in inflation.
As a permanent voting member of the Federal Open Market Committee and its vice chairman, the New York Fed president is traditionally considered part of the Fed’s leadership “trinity,” alongside the Chair and Vice Chair of the Board of Governors.
Many Fed watchers speculate that these comments were coordinated, possibly with Fed Chair Jerome Powell, to avoid surprising investors.
