Williams Says Late-2026 Fed Rate Hike May Be Appropriate

New York Fed President John C. Williams said another interest-rate increase late this year may be appropriate if the economy follows his forecast, with inflation still above the Federal Reserve’s 2% goal.

The Fed raised its federal funds target range by a quarter percentage point to 3.75% to 4% at its Sept. 16 meeting. Williams said policymakers have time to review incoming data before deciding on their next move.

Williams said inflation has risen to 3.7%. He expects it to ease to just above 2% next year and reach the Fed’s goal in 2028.

Energy costs and demand for goods linked to artificial-intelligence investment are adding to price pressures. Tariff effects are no longer adding to inflation in goods prices, Williams said, though new tariffs could change that. He has not seen evidence that energy and AI-related pressures are spreading into broader, more persistent inflation.

Williams expects real GDP to grow by an average of about 2.25% in both 2026 and 2027. His forecast puts unemployment at about 4% a year from now, slightly below its current level.