|

Fed's Williams: Policy in right place, no need to raise or lower rates

Federal Reserve (Fed) Bank of New York President John Williams said on Wednesday that higher energy prices are driving up costs and inflation, per Reuters.

Key takeaways

"Economy has solid growth around 2%, job market has stabilized."

"The job market is healthy."

"Inflation is up quite a bit."

"I would expect inflation to peak in the next few months."

"Inflation should be elevated through remainder of year."

"Inflation is elevated in goods sector and energy related forces."

"Inflation also elevated in tech due to AI."

"A lot of infaltion is due to tariffs and inflation and computer chips."

"Hopefully energy prices will stabilize."

"I'm not that worried about persistent impacts on inflation so far."

"Not expecting long running increase in energy prices."

"Will have to wait and see what happens with latest tariff moves."

"Monetary policy is exactly in the right place, no need to raise or lower rates."

"Upside risks to inflation have increased."

"I don't see an obvious argument to change interest rates right now."

Market reaction

The US Dollar Index continues to edge higher in the American session on Wednesday and it was last seen rising 0.2% on the day at 99.42.

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
Share:

Editor's Picks

GBP/USD clings to small gains near 1.3450 after UK jobs data

GBP/USD trades in positive territory at around 1.3450 in the European session on Tuesday. The UK ILO Unemployment Rate remained at 4.9% in the three months to May, compared with expectations of 5%, but failed to provide any impetus to the British Pound's renewed uptick. Traders stay cautious amid US-Iran uncertainty and the UK political transition.

EUR/USD keeps range above 1.1400 after German ZEW

EUR/USD is keeping its range above 1.1400 in Tuesday's European session, as the US Dollar (USD) retreats following Monday's rebound. Nevertheless, the uncertainty around the US-Iran conflict limits the pair's upside. Meanwhile, the Euro (EUR) pays little heed to the strong German sentiment data, as traders await Thursday's European Central Bank policy announcements, which could drive the Euro's near-term valuation.

Gold extends recovery toward $4,100

Gold gains traction following Monday's choppy action and advances toward $4,100 on Tuesday. However, the uncertainty surrounding the conflict in the Middle East and growing expectations for a hawkish Federal Reserve policy outlook could make it difficult for the precious metal to gather bullish momentum in the near term.

Shiba Inu price extends gains as on-chain and derivatives metrics confirm bullish bias

Shiba Inu extends gains, trading above $0.0000042 after breaking above the descending trendline the previous day. Strengthening on-chain data and improving derivatives metrics support further gains for the meme coin. CryptoQuant’s exchange netflow chart below shows five consecutive days of net outflows since July 17.

Brent nears a critical crossroads as the global economy faces one too
Markets spent last Friday digesting a Reuters report that Iran has told the Houthis to stand ready to close Bab el-Mandeb if the US strikes Iranian power infrastructure — missiles and drones are reportedly already positioned near the strait, awaiting the order from IRGC officers in Yemen.
US Dollar mid-year outlook: Exceptional currency, exceptional risks?
The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.