New York Fed’s Williams Signals One More Hike May Be Enough, Breaking With Wall Street Bets

New York Federal Reserve President John Williams said Tuesday that he sees no need for additional interest rate increases in 2027 beyond one more hike this year, a stance that puts him at odds with both market expectations and a sizable bloc of his colleagues on the central bank’s rate-setting committee. Speaking in an interview with Bloomberg News, Williams said he had not changed his view that one more increase may be appropriate, adding that he had no reason at this time to believe the Fed would need to go further.

The comments landed against a market backdrop that tells a very different story. Fed funds futures traders are largely wagering that the central bank will raise rates at least once in 2027, with CME’s FedWatch data showing roughly 90 percent odds as of Tuesday that the Fed’s overnight rate will end that year at least a half percentage point above current levels. Williams, a permanent voting member of the Federal Open Market Committee, also finds himself diverging from many of his fellow policymakers, though he remains aligned with the majority view. Of the 18 officials who submitted rate forecasts for 2027, eight anticipate one more increase following an additional hike this year.

The Fed delivered its first rate increase since 2023 in September, and officials signaled in meeting minutes that they planned another hike, though they stopped short of specifying when. The central bank has two remaining policy gatherings this year, one at the end of this month and a final meeting in December. Williams cautioned against reading too much certainty into any forecast, telling Bloomberg that “we’ll have to see” how things unfold. He noted that the economy is being shaped by a wide range of influences and that policymakers simply have to keep watching the data.

On inflation, Williams urged a focus on underlying trends rather than the price shocks rippling through the economy from energy costs and artificial intelligence. While acknowledging that energy prices continue to push headline inflation higher, he suggested they could eventually provide relief on an annual basis, and he said the effects of tariffs on price growth have largely already played out. He projected that overall inflation in 2027 should come in near the Fed’s 2 percent target on an annual basis, a notable improvement from the personal consumption expenditures price index reading in August, which showed a 12-month increase of 3.4 percent, or 3 percent excluding food and energy.

Williams, who previously led the San Francisco Fed, said he remains convinced that disinflationary forces are still at work and have not fundamentally changed. In fact, he said his forecast calls for inflation to come down quite a bit next year, reinforcing his view that the central bank may be closer to the end of its tightening cycle than traders currently believe.