New York Federal Reserve president John Williams told Yahoo Finance he expects the central bank to keep rates unchanged for “some time” as policymakers watch how new tariffs from President Trump affect the economy.
The tariffs, he added in an interview Monday, could produce “more prolonged effects” on inflation and he warned that it could take a few years to figure that all out.
“It is still early days to be able to come to a concrete conclusion around this,” Williams said, noting that the central bank will be watching for “indirect effects” from new duties that “might not be fully felt for a couple of years.”
“Yes, we will see tariffs affect prices and then we will just have to keep watching how do those cascade into prices downstream to other goods in the economy,” he added, saying the Fed needs to “really have an open mind about how long these last in terms of their effects on inflation and the economy.”
The new comments from one of the Fed’s most influential policymakers come as central bankers wrestle with the many uncertainties ahead as the president rolls out his new trade policies. The next step comes Wednesday as the president is expected to unveil a set of new tariffs on many other countries.
The question for the Fed is whether any price increases caused by inflation will pass quickly or linger.
Fed Chair Jerome Powell has said that his “base case” is that any extra inflation from Trump’s slate of tariffs will be “transitory.”
But some of his colleagues worry the effects could be more persistent, adding to the uncertainties ahead for the central bank.
The Fed’s goal is to get inflation down to its 2% target, but a key measure released last Friday remains well above that marker. The “core” Personal Consumption Expenditures (PCE) index, which excludes volatile food and energy prices, rose 2.8% year over year.
Inflation now stands at the level the Fed predicted it would be at year’s end — and that’s before some of Trump’s most aggressive tariff plans kick in.
The worry among some economists and market watchers is that inflation could rise and economic growth could slow, creating a so-called stagflation environment that was last seen in the 1970s.
Williams said he sees no signs of stagflation “now,” citing an unemployment rate of 4.1% and headline inflation around 2.5%.
He also pledged, “We will not let high inflation take root like it did in the 70s and 80s.”
At the same time, though, “there is definitely a risk of inflation being higher than what’s in the forecast.”
