Fed’s Williams Signals One More Rate Hike Before Year-End

Federal Reserve Bank of New York President John Williams said Tuesday that policymakers have time to assess incoming economic data before deciding on their next interest rate move, although he still expects one additional rate increase before the end of the year.

Speaking at the University of Buffalo in Buffalo, New York, Williams indicated that the Federal Reserve does not need to rush into another rate hike following its September policy decision. At that meeting, the Fed raised its benchmark overnight interest rate by 25 basis points, bringing the target range to 3.75% to 4%.

“If the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target,” Williams said.

He stressed that any future Fed rate decision will depend on economic data and how inflation, employment and broader economic conditions develop.

Financial markets currently see a strong possibility of another interest rate increase at the Fed’s October meeting. Williams’ comments, however, suggested policymakers may have scope to wait longer before tightening monetary policy again.

The New York Fed chief said officials must remain focused on bringing inflation sustainably back to the central bank’s 2% target. Inflation has remained above that goal for more than five years, while price pressures intensified this year amid higher energy costs linked to Middle East conflict and tariffs imposed by President Donald Trump.

Williams also said artificial intelligence investment is contributing to inflationary pressures. However, he noted that much of the inflationary impact from tariffs has already passed through the economy, assuming no additional import taxes are introduced.

Looking ahead, Williams expects inflation to stand at roughly 3.5% by the end of 2026 before gradually declining next year and returning to the Fed’s 2% target in 2028.

He also projected U.S. economic growth of around 2.25% this year. Meanwhile, Williams expects the unemployment rate to rise to approximately 4% next year as the Federal Reserve continues balancing inflation risks with economic growth and labor market conditions.