Strong Warnings from the New York Fed President: “The Fight Against Inflation Could Take a Tougher-than-Expected Turn”

John Williams, president of the Federal Reserve Bank of New York, warned in his latest economic outlook speech that the fight against inflation may become more challenging than expected.

Williams announced an inflation forecast of 3 percent for 2026, stating that price increases would only slow to 2 percent in 2027. This estimate points to a more upward trajectory compared to his assessment just weeks ago, which indicated a range of 2.75–3 percent.

Another notable change in the discussion was the shift in expectations regarding trade policies. In April, Williams had stated that the impact of tariffs would diminish over time and put downward pressure on core inflation. However, in her latest assessment, while acknowledging that the price impact of current tariffs will largely be completed in the coming months, she said that a new wave of tariffs could be introduced, creating additional upward pressure on import prices.

On the other hand, Williams also touched upon the economic effects of artificial intelligence technologies. The FED official stated that AI could increase productivity and investment, which could push the “neutral interest rate” higher in the economy. Currently assessing this rate to be around 1 percent, Williams noted a “struggle” between the downward pressure of demographic factors and the upward impact of AI and increased productivity.

Developments surrounding the FED were not limited solely to economic expectations. Prosecutor Jeanine Pirro, commenting on the investigation into FED Chairman Jerome Powell, stated that the process was not yet entirely closed. Pirro indicated that she could close the case if the investigator’s report found no evidence, but reserved the right to independently review the report’s details. She also noted that in past investigations, she had been able to identify elements of wrongdoing even when investigators found no evidence, adding that the final decision rested with her assessment.

*This is not investment advice.