Fed's Williams: 2% Inflation Goal Now Seen in 2028

New York Federal Reserve President John Williams pushed back against the idea that rate cuts are close, saying Thursday that inflation will take longer to return to the central bank's target than he previously projected. He now expects inflation to reach 2% only in 2028, a year later than his earlier forecast.

“Inflation is still too high,” Williams said at an event in New York. “It is imperative that we restore inflation to 2% on a sustained basis.”

The message puts Williams squarely in the Fed's hawkish camp. Policymakers have spent recent weeks dialing back expectations for near-term easing after a string of stronger-than-expected inflation prints. The market now prices the first full 25-basis-point rate cut no earlier than September, according to CME FedWatch data.

Yet Williams stopped short of endorsing additional tightening. He described the current policy stance as “well positioned to lower price pressures,” suggesting the Fed sees its peak rate as adequate for now. The question is how long that rate will stay there.

Williams said he expects inflation to moderate as tariff-related price increases fade, housing-cost gains cool, and geopolitical disruptions from the Middle East ease. Each of those assumptions carries risk. Tariff pass-through has been lumpy. Housing inflation has proven stubbornly sticky. And the Middle East picture remains volatile despite recent lulls in headlines.

On the economy, Williams maintained a broadly positive view. Growth should stay positive, he said, and the labor market remains resilient. That combination – a solid economy, sticky inflation, and a central bank unwilling to cut – is the core of the higher-for-longer trade that has kept short-term rates elevated and pushed long-end yields back above 4.5%.

For currency markets, the message is straightforward. The dollar held gains after Williams' remarks, with the Bloomberg Dollar Spot Index trading near session highs. A Fed that stays on hold while other central banks start easing – the European Central Bank has signalled a June cut, the Bank of England is leaning that way – keeps the interest-rate differential wide.

Williams delivered the speech ahead of Friday's University of Michigan consumer sentiment data, which will offer a fresh read on inflation expectations. The next Fed policy decision is May 7.