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Fed’s Williams says inflation is excessive but will decrease soon

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New York Federal Reserve President John Williams recently stated that inflation is still too high but is expected to start decelerating later this year. Despite uncertainty surrounding monetary policy, Williams did not provide clear indication of whether interest rate cuts are imminent. The central bank has noted a lack of progress toward its goals as inflation readings have been higher than expected in 2026.

During a Q-and-A session with CNBC, Williams expressed confidence in the current policy positioning, describing it as “well-positioned” and “restrictive.” While he acknowledged the potential need for interest rate adjustments based on data analysis, he emphasized that timing will be contingent on goal achievement. Williams also indicated that he does not foresee rate hikes in the near future, despite previous market expectations of aggressive cuts.

In light of higher-than-anticipated inflation readings this year, the Fed is reevaluating its stance. Previously, markets had anticipated significant rate cuts, but the current pricing suggests only one decrease is likely, potentially occurring in November. Williams highlighted the impact of global disinflation on inflationary pressures, projecting a moderation in inflation during the second half of the year. However, he stressed that inflation still exceeds the 2% target and remains a primary focus.

For nearly a year, the Fed has maintained its benchmark borrowing rate at 5.25% to 5.5%, the highest level in over two decades. The central bank’s objectives include sustaining a strong labor market and returning inflation to the 2% target. Most inflation indicators are currently around 3%, with a key Commerce Department reading scheduled for release. The personal consumption expenditures price index, the Fed’s preferred measurement, is expected to be 2.7% for April, with Williams anticipating a decline to 2.5% by the end of the year.

Williams highlighted the progress made toward achieving the Fed’s goals in recent years and expressed confidence in the ability to restore price stability. He emphasized the commitment to fostering sustained economic prosperity and achieving the dual mandate targets: price stability and strong economic conditions. As the Fed continues to monitor economic indicators, including inflation data, decisions regarding monetary policy adjustments will be informed by data analysis and goal attainment.

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