Fed’s Williams: June CPI consistent with progress on inflation

Federal Reserve (Fed) Bank of New York President John Williams said on Wednesday that the latest United States (US) Consumer Price Index (CPI) report was consistent with the inflation progress he hopes to see over the coming months. Williams delivered keynote remarks at a talk with the Partnership for New York City.

Key takeaways:

Markets are responding to changes in the Middle East conflict.

The latest CPI reading was consistent with the inflation progress Williams hopes to see in the coming months.

The CPI report represented a “little piece” of inflation returning toward the Federal Reserve’s goal.

Risks from energy-price inflation have eased somewhat.

There is “absolutely not” any consideration of changing the Fed’s 2% inflation target.

The 2% target remains the right number, and the Fed should not “move the goal posts.”

Fed Chair Kevin Warsh profoundly believes in the central bank’s mission.

Warsh understands the importance of delivering price stability and maximum employment.

Warsh is bringing fresh thinking that is “very welcome.”

The Fed Chair is focused on the difficult task of achieving the central bank’s monetary-policy goals.

There was very strong support among policymakers for moving away from forward guidance.

The Fed does not currently have a clear direction regarding where interest rates are heading or when they could change.

Williams fully supported the decision to step away from forward guidance.

He does not currently have a particular view about the future direction of monetary policy.

The US is experiencing an explosion in the creation of new businesses.

There remains significant dynamism in the US economy.”

Williams underscores a 2% inflation target but offers no rate path clarity

The Fed’s Williams delivered a moderately cautious tone with a FXS Speechtracker score of 5.4/10, slightly softer relative to the historical average of 5.9/10. The emphasis that the latest CPI print is “consistent” with the desired disinflation path and that risks to energy price inflation are “somewhat less” is tempered by a firm rejection of any change to the 2% target and an explicit lack of guidance on the future path of interest rates, reinforcing data dependence amid Middle East conflict-related market shifts.

The strong support for moving away from forward guidance and comments on US economic dynamism point to confidence in underlying growth but leave the US Dollar sensitive to incoming data rather than policy pre-commitments.

The FXS Fed Sentiment Index slipped by 0.38 points to 126.13, signaling a modest pullback in perceived hawkishness versus recent communications. Despite the decline, the index remains firmly in hawkish territory above 100, indicating that policy bias is still skewed toward restraint even as the tone of this speech is slightly less hawkish compared to the established baseline captured by the FXS Speechtracker.