In a Bloomberg interview, John Williams reiterated, "I haven't changed my view that it may be appropriate to have one more rate hike." He added, "I don't think at this time I have any reason to believe that we would need to do more." As for the outlook into next year, he kept the door open, saying "we'll have to see," and emphasized the Fed will keep tracking the numbers: "This economy is being affected by lots of different influences, and we just have to keep watching the data."
Williams' stance differs from market pricing and some policymakers, though he remains in step with most of the committee. As of Tuesday, CME's FedWatch showed traders broadly expecting at least one increase in 2027, with the latest trades assigning about a 90% chance that the policy rate finishes 2027 at least one half percentage point higher than it is now. Inside the Federal Open Market Committee, eight of the 18 officials who submitted a 2027 projection call for one more increase after another move this year. Williams, as New York Fed president, votes at every meeting.
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Williams, a former San Francisco Fed chief, said policymakers should focus on "underlying trends" in inflation while taking into account shocks linked to energy and artificial intelligence. He noted energy prices are still pushing up headline inflation, but said they could help the year over year picture later on. He also said the primary effects of tariffs on prices have mostly shown up.
Looking out to 2027, he expects overall inflation to run close to the Fed's 2% goal on a year-over-year basis. Data for August showed the Fed's preferred inflation gauge, the personal consumption expenditures price index, up 3.4% from a year earlier, or 3% when excluding food and energy. "In fact, my forecast for inflation for next year is inflation to come down quite a bit."
In September, the Fed delivered its first rate hike since 2023. Meeting minutes pointed to plans for another increase, without specifying when. For everyday investors, here is the tension to watch: Williams is signaling possibly one more move this year and no extra tightening in 2027, while markets still lean toward higher for longer. That gap can keep reactions jumpy around each inflation release and every Fed update.
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