Williams says one more rate hike likely this year, but no rush to act
His softer tone on timing follows a week in which Barr, Goolsbee and Cook all argued for continued tightening despite market strain.
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Chart: Fed target rate, top of the range
UpdateTuesday, September 29, 2026 at 2:55 PM ET
Markets now price just one more hike by year-end, not the three previously priced in.
Traders have cut bets on an October rate increase after Williams's comments, and now price in just one more hike by year-end, down from the three hikes markets had priced in earlier. Williams had said earlier the same day that US economic momentum remains strong, pointed to AI investment as a driver of inflation, and called for year-end inflation of 3.5%, saying the Fed's 2% target remains imperative. Fed vice chair Musalem separately said AI spending is adding to inflation pressure and that productivity gains from it have not yet appeared, adding the Fed cannot ease policy on hopes of future gains.
UpdateTuesday, September 29, 2026 at 2:10 PM ET
Williams also said US economic momentum is strong and may be strengthening. He put GDP growth at 2.25% this year and unemployment at 4% through 2027. He said artificial intelligence investment is becoming an increasingly big issue for inflation.
UpdateTuesday, September 29, 2026 at 2:10 PM ET
Williams also said it is imperative to get inflation back to 2%, and that the Fed must ensure high inflation does not become entrenched. He said Fed policy can keep the impact of supply shocks from becoming long-lasting. He put inflation at 3.5% this year before it reaches the 2% target.
Federal Reserve Bank of New York President John Williams said one more interest rate increase is likely this year if the economy performs as expected, following the central bank's rate hike in September. He said he sees no need for urgency and wants to see more data before deciding on the Fed's next move.
His tone is milder than that of several colleagues in recent days. Fed governor Lisa Cook has said the labor market looks able to withstand higher rates while she watches for job losses tied to artificial intelligence, and has said future Fed moves depend on incoming data. Governor Michael Barr has repeated his view that the Fed's 2% inflation target needs adjusting. Chicago Fed President Austan Goolsbee has said the Fed should not worry about keeping bond or stock markets happy and has called for revisiting the logic of looking through supply shocks. Together with St. Louis Fed President Alberto Musalem, they have argued this past week that inflation risk outweighs concerns about the labor market and that more tightening is needed regardless of market discomfort.
Bond markets have already priced in a harder path. Money markets are pricing three rate hikes over the next year. The 10-year Treasury yield rose seven basis points to 5.23% on Monday, its highest level since 2007, while the 30-year yield reached 5.47%. Benchmark yields have climbed almost 65 basis points since the end of August. Gold dropped 3.9% to $4,118.66 on Monday as the dollar gained.
Williams's remarks do not reverse that hawkish trajectory: he still expects a hike to come if the data cooperate. But set against a week in which the tone from other officials had hardened by the day, his comment that there is no need to rush marks a slight easing of urgency rather than any change in direction.