BlockBeats report, on August 3, New York Fed President John Williams stated that the Federal Reserve’s decision to hold rates steady in July aligns with current economic conditions, as the labor market remains stable and economic growth is solid without signs of overheating, making an immediate rate hike unnecessary.
Williams said that most of the impact of tariffs on U.S. inflation 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 near their peak, and the factors previously driving inflation higher are expected to gradually ease.
He noted that the Middle East conflict has led to rising oil prices, but the market generally expects the situation to eventually ease, potentially causing prices to fall once energy trade resumes. However, significant uncertainty remains in the energy markets.
Williams reiterated that U.S. inflation is expected to return to the 2% target before 2028. He noted that declining housing costs, falling goods inflation, and moderating core services inflation will continue to drive inflation downward.
Regarding the AI investment boom, Williams stated that he currently sees no signs of a bubble. He believes AI is a general-purpose technology with transformative potential, and the current investment enthusiasm reflects market expectations for productivity gains and new business models. However, future competition among different companies and technological pathways could lead to market volatility.
Additionally, Williams stated that the Federal Reserve has abandoned forward guidance due to heightened economic uncertainty, emphasizing that policy should be dynamically adjusted based on data received at each meeting rather than predetermined paths. He stressed that the Fed will continue to independently assess economic data and remain committed to bringing inflation back to its 2% target.