Williams expects inflation easing, warns of hikes

United States — Federal Reserve Bank of New York President John Williams said in a Reuters interview that he expects inflation to ease gradually, reaching the Fed's 2% target by 2028, but warned the central bank would raise rates if inflation does not slow. He supported the United States — Federal Open Market Committee's decision to hold the federal funds rate at 3.50%-3.75%, despite three dissents from officials including Cleveland Fed President Beth M. Hammack, who argued for a hike. Williams downplayed financial stability risks from AI investment, citing high earnings and manageable leverage. He also noted uncertainty from the Middle East conflict and tariffs, but expected disinflationary forces to reassert themselves. The Fed's communications under new Chairman Kevin Warsh have shifted away from forward guidance.