If you have felt prices stop racing higher, John Williams thinks you are not imagining it. In a Wednesday CNBC interview, the New York Fed chief said "the data recently has been encouraging" and that he is "seeing the trend in inflation moving slowly down as some of the effects of the tariffs move into the rearview mirror." He added that higher energy prices are not showing up broadly in other services. For him, the main forces still pushing on inflation are tariffs and costlier energy tied to the conflict in the Middle East, with "some effects of higher service inflation" lingering.
Williams backed the July call to hold interest rates. As he put it, "Coming out of the last FOMC meeting, interest rates are in a good place" to balance full employment and price stability. For now, "We're collecting a lot of data now, and we'll have to reassess that." This year the Fed has left rates unchanged at five consecutive meetings, and in July three voting members dissented in favor of a quarter-point increase.
He linked the recent jump in bond yields to investment around artificial intelligence and to expectations for stronger growth. Even so, he does not see clear evidence that productivity gains have lifted the neutral rate, which he estimates around 1%. In his words, the "real interest rate has moved up a little bit, but not that much."
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Mark the calendar: the next Fed meeting is September 15-16 in Washington. The split over how tight policy really is was on display at the central bank's annual gathering in Jackson Hole, Wyoming. There, chairman Kevin Warsh said the evidence doesn't show broad financial conditions to be restrictive, and added that officials have "work to do" should they lack confidence that underlying inflation is moving toward the 2% goal.
What this means for your money: price pressures are easing without fresh spillovers from energy, policy is holding steady for now, and September's meeting will show whether cooler inflation keeps the Fed on pause or revives the push for more tightening.
