New York Fed’s Williams says inflation is still too high but expects energy prices to ease

New York Fed President John Williams said inflation remains far too high and that the bigger risk for the Federal Reserve is price pressures proving persistent, even as he expects energy and oil prices to ease after a recent spike tied to Middle East tensions.

Williams made the remarks at a New York Fed event on Thursday, July 9. He said the labor market appears stable and reaffirmed the Fed’s 2% inflation target, while stressing that policy would need to respond if inflation runs meaningfully above his baseline forecast.

Inflation still the main concern

Williams said inflation is still too high for comfort and that the Fed should treat it as the larger risk to its dual mandate. He said tariffs and higher energy prices could turn out to be less damaging than feared, depending on how events unfold.

He also said artificial-intelligence investment could add to inflation pressure if demand outpaces supply, though productivity gains from the technology could offset some of that effect.

Energy prices may ease

The remarks came after oil prices had risen on renewed U.S.-Iran tensions and then eased as the situation stabilized. Williams said he expects oil and broader energy prices to retreat over time.

That view matches broader market attention on whether the latest energy shock will fade quickly enough to keep headline inflation from reaccelerating.

Fed watching incoming data

Williams said he remains data-dependent and that the Fed would have to respond if inflation proves more persistent than his baseline outlook suggests.

The next key test will come with the Labor Department’s inflation report next week. For now, Williams’ message was that the labor market looks steady, but inflation remains the more serious policy problem.