New York Fed's Williams: Another Rate Increase This Year 'Reasonable'

New York Fed President John Williams said Sept. 24 that inflation remains well above the Federal Reserve's 2% goal, leaving policymakers with "a lot of work to do" to restore price stability. He said another rate hike this year would be a "reasonable" outcome, while stressing that decisions will be guided by incoming economic data. Williams pointed to elevated energy prices and strong demand tied to AI-related investment as key factors adding to inflation risks. He also said the U.S. economy has remained resilient after major shocks, and noted inflation has run above the Fed's target for five straight years. The Fed last week unanimously raised rates by 25 basis points, lifting the federal funds target range to 3.75%4%. The latest dot plot showed 16 of 18 officials project at least one additional increase before the end of 2026. Williams said policymakers will reassess the outlook at each meeting using the latest readings on growth and inflation. Markets have also raised expectations for an October move. CME FedWatch data as of Sept. 24 put the odds of an October rate hike at about 70%, up from roughly 54% a day earlier. Williams added that AI investment has emerged as a new demand-side variable. While it could boost productivity in the coming years, he said its contribution to overall productivity remains limited so far.