New York Fed President John Williams maintained his view that inflation pressures will gradually ease, but signaled he is prepared to raise rates if that does not happen. In an interview with Reuters, he said disinflationary pressures will strengthen again as energy prices and tariffs peak, and reiterated that current monetary policy is appropriately positioned. At the same time, he noted it would be appropriate to act if inflation is not on track to return to 2 percent, and said he strongly supported the decision to hold rates steady at the July FOMC meeting. While acknowledging uncertainty around energy prices due to the Middle East situation, his baseline scenario expects conflict-driven inflation pressures to fade from the second half of this year into next year.
Fed official signals possible rate hike if inflation persists, which would raise the policy rate.
Hawkish comments from Fed official suggest potential rate hikes, pushing yields up.