MNI BRIEF: Fed’s Williams: Policy Will Return Inflation To 2%

Federal Reserve Bank of New York President John Williams said Tuesday risks to the central bank’s dual mandate goals are in better balance and interest rates are on hold until inflation declines.

“Monetary policy is currently well positioned to support the stabilization of the labor market and return inflation to our 2 percent goal,” he said in remarks prepared for a credit union conference in Washington. “Looking further ahead, if inflation follows the path I expect, further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive.”

The vice chair of the FOMC said he expects some additional pass-through of tariffs into consumer prices during the first half of this year. “Given the lack of second-round effects and well-anchored inflation expectations, I expect the tariffs largely to have one-off effects on prices.“

“Therefore, I anticipate inflation to start coming back down later this year when the peak effect of tariffs on the inflation rate is behind us,” he said.

Williams expects GDP growth of about 2.5% this year and overall inflation to come in at around 2.5% in 2026, then fall to 2% in 2027.