By Michael S. Derby
Oct 13 (Reuters) – New York Federal Reserve President John Williams has reaffirmed his view that the US central bank may need to raise interest rates once more this year in its bid to lower inflation.
“I haven’t changed my view that it may be appropriate to have one more rate hike” in 2026, Williams told Bloomberg News in an interview published on Tuesday.
And when it comes to 2027, “I don’t think at this time I have any reason to believe that we would need to do more,” Williams said, though he left the door open for data to change that outlook.
“We’ll have to see” what happens next year, Williams said, adding that “it’s still mid-October. This economy is being affected by lots of different influences, and we just have to keep watching the data.”
The Fed raised its policy rate by a quarter of a percentage point to the 3.75%-4.00% range last month.
Speaking less than two weeks after that rate hike, Williams, who also serves as vice chair of the central bank’s rate-setting Federal Open Market Committee, reshaped market expectations about the policy outlook when he said there was no urgency to follow up the move with another rate increase. Williams, speaking at an event in Buffalo on September 29, said the Fed probably needed to deliver only one more hike in 2026.
Those remarks last month caused investors to price out the prospect of a hike at the Fed’s October 27-28 meeting. Other central bank officials have echoed that lack of urgency to follow the September hike with more tightening.
Williams’ comments about the outlook were notable given that Fed Chairman Kevin Warsh has said little publicly about the policy outlook.
In the Bloomberg interview, Williams said he expects inflation to ease toward the Fed’s 2% target over time, but added that near-term price pressures were being affected by high energy prices tied to the war in the Middle East. He also said investment tied to the tech sector is pushing up inflation.
“I still believe there’s disinflationary forces at play,” Williams told Bloomberg. “My forecast for inflation for next year is inflation to come down quite a bit — overall inflation to be near our 2% target for the year as a whole next year, and that’s reflecting some of these factors I mentioned, that the tariffs will be totally in the rearview mirror,” he said.
“I still believe that energy prices will not be adding to inflation next year or after that,” Williams said.
“My view is this is not an economy that is overheating overall,” he added. “This is not an economy where it’s adding inflationary pressures beyond these particular shocks that we’re experiencing.”
(Reporting by Michael S. Derby and Gnaneshwar Rajan in Bengaluru; Editing by Chris Reese and Paul Simao)
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