NY Fed’s Williams sees one more rate hike this year, disinflation ahead

Federal Reserve Bank of New York President John Williams said he still expects one more interest-rate hike this year but sees no need for further increases in 2027, citing underlying disinflationary forces despite pressures from energy prices and artificial intelligence investment.

“I haven’t changed my view that it may be appropriate to have one more rate hike,” Williams said Tuesday in an interview with Bloomberg at the New York Fed. “I don’t think at this time I have any reason to believe that we would need to do more.”

Williams expects inflation to slow “quite a bit” over the next year, arguing that recent price pressures from tariffs, energy costs and AI-related demand have not fundamentally reversed the disinflationary trend.

While acknowledging that AI infrastructure investment is driving unusually strong demand in parts of the economy, Williams said policymakers must focus on broader conditions rather than isolated pressures.

“This is not an economy that is overheating overall,” he said, adding that underlying inflation measures have declined.

Williams also defended the Fed’s September quarter-point rate increase, saying two months of economic data helped clarify the underlying trends. He cautioned that the outlook remains uncertain and policymakers must continue monitoring incoming data.

“It’s still mid-October,” Williams said. “This economy is being affected by lots of different influences, and we just have to keep watching the data.”