NY Fed President: Tariff-Driven Inflation Near Peak, AI Investment Not in a Bubble

Huoxing Finance reports that on August 3, New York Fed President John Williams stated that the Federal Reserve’s decision to hold rates steady in July aligned with current economic conditions, as the labor market remained stable and economic growth was solid without signs of overheating, making an immediate rate hike unnecessary. Williams noted that most of the inflationary impact from tariffs on the U.S. economy has already been transmitted, and it is unlikely to continue significantly pushing up inflation in the coming months. Under the baseline scenario, inflationary pressures from energy prices and tariffs have approached their peak, and factors previously driving inflation upward are expected to gradually ease. He added that while Middle East conflicts have pushed oil prices higher, markets generally anticipate eventual de-escalation, and prices could decline once energy trade resumes. However, significant uncertainty remains in energy markets. Williams reiterated that he expects U.S. inflation to return to the 2% target before 2028, citing continued downward pressure from falling housing costs, declining goods inflation, and cooling core services inflation. Regarding the AI investment boom, Williams said he sees no signs of a bubble at this time. He views AI as a transformative general-purpose technology, and current investment enthusiasm reflects market expectations of productivity gains and new business models, though future competition among firms and technological pathways may introduce market volatility. Additionally, Williams explained that the Fed has discontinued forward guidance due to heightened economic uncertainty, emphasizing that policy should be adjusted dynamically based on data from each meeting rather than predetermined paths. He stressed that the Fed will continue to independently assess economic data and remain firmly committed to returning inflation to the 2% target.