Fed's Williams says inflation peaked, policy aims 2% target

New York Federal Reserve President John Williams said on Wednesday, July 15, that inflation has likely peaked and that current monetary policy is positioned to guide price increases back to the central bank's 2% target. Speaking to business leaders in New York, Williams acknowledged inflation remains "unquestionably too high" at about 4%, but outlined several reasons for expecting a gradual decline.

Williams cited multiple factors for his outlook, including his view that the worst effects from recent tariff increases have passed, that shelter inflation is moderating, and that oil prices have likely peaked after a spike driven by Middle East conflict. He also noted that supply-demand imbalances from a surge in business investment in artificial intelligence should recede, that the labor market is not adding to inflation pressures, and that long-term inflation expectations remain stable.

Based on these conditions, Williams forecast overall inflation to decline to around 3.25% by the end of 2026, continue on a downward path toward 2% in 2027, and land on target in 2028. He also said the job market has stabilized and projected the unemployment rate would gradually fall to 4% by 2028...