New York Fed President WILLIAMS said another rate hike this year would be
appropriate, but if the economic outlook proceeds as expected, additional hikes
may not be needed in 2027. He said he supported the September hike, citing
rising energy prices and stronger AI infrastructure investment. WILLIAMS said
the Middle East conflict has lifted energy prices and is transmitting into core
inflation via higher transport and food costs, while AI-driven demand for data
centers and chips is pushing up some commodity and construction labor costs. He
added that tariffs, energy and AI demand have left inflation higher than
expected this year, but inflation expectations remain stable and core inflation
measures are trending down; he expects inflation to retreat noticeably next year
toward the 2% target. On AI, he said demand currently exceeds supply but rising
chip capacity and productivity should ease supply constraints and exert downward
pressure on inflation over time. On Treasury yields, he said long-term rates
reflect multiple factors—including bond supply/demand, AI investment, fiscal
policy and energy prices—not only monetary policy.
