-
Conflict in the Middle East is already pushing inflation higher
-
Despite ongoing challenges, monetary policy remains “well positioned”
-
Economic prospects are deeply uncertain due to the impact of war
-
New signs of disruptions in supply chains are beginning to emerge
-
Portions of the energy shock are now filtering into broader prices
-
A rapid resolution to the conflict would assist in lowering inflationary pressure
-
Anticipates the unemployment rate will remain within the $4.25\%$ to $4.5\%$ range
-
Estimates that inflation will move back to the $2\%$ goal by 2027
-
Foresees inflation reaching $2.75\%$-$3\%$ this year, driven by energy costs
-
Predicts GDP growth will sit between $2\%$ and $2.5\%$ in 2026
-
The jobs market is currently providing inconsistent signals
-
The Federal Reserve’s system for controlling rates is performing very effectively
-
Predicts the effect of tariffs on inflation will diminish throughout this year
New York Fed President John Williams said the Middle East conflict is already pushing inflation higher, and the outlook from here is deeply uncertain. He’s sticking to the line that monetary policy is “well positioned,” which is Fed-speak for ‘we’re in no rush to do anything’ and that’s what the market continues to price with just 10 bps of easing in the 2026 curve.
Today’s economic data was strong though and the inflationary warning signs are building. Supply chain disruptions are starting to reappear, and the energy shock is no longer contained — it’s bleeding into broader prices. Williams made the obvious point that a quick resolution to the conflict would take pressure off inflation.
On the forecasts, Williams sees inflation running at 2.75%-3% this year on energy costs, before drifting back to the 2% goal by 2027. That’s a long runway. GDP is pegged at 2%-2.5% in 2026, with unemployment holding in a 4.25%-4.5% range. The jobs market, in his words, is sending mixed signals — which isn’t much to hang a policy view on.
