Federal Reserve Bank of New York President John Williams said the central bank has time to assess incoming economic data before its next interest rate move, even as he still expects one more rate increase before year-end. Meanwhile, Chicago Fed President Austan Goolsbee warned that allowing inflation to run above target for an extended stretch carries real risk.
What Williams Said
Williams told an audience that monetary policy could focus primarily on curbing price pressures given a robustly expanding economy and a resilient labor market. "It is imperative that we return inflation to our 2% target on a sustained basis," Williams said. He projected economic growth of 2.25% for the year and said he expects the unemployment rate to stand at 4% next year. His remarks led financial markets to reduce their expectations for a Fed rate hike at the upcoming October meeting.
What Goolsbee Said
Goolsbee said allowing inflation to remain above the central bank's 2% target for five and a half years is "playing with fire," adding that policymakers may need to respond to supply shocks with lasting effects on prices. "I think we have to consider responding to those persistent shocks," Goolsbee said. Despite the warning, he described himself as one of the Fed's more optimistic policymakers regarding the expected path for interest rates, while adding that the central bank needs clearer evidence that price pressures are actually easing before it can consider cutting rates.
How the Two Positions Fit Together
Despite their differing emphasis, both officials appear to agree on the underlying trajectory: further tightening remains likely given how persistently inflation has run above target, even if neither is treating an October hike as a foregone conclusion. Williams' framing centers on patience and data dependence, while Goolsbee's language leans more explicitly into the risk of complacency — together painting a picture of a Fed committee that remains hawkish in substance, even as individual officials differ somewhat in tone and urgency.
The Broader Context
The comments come as markets had been pricing in the possibility of a back-to-back rate hike at the Fed's October meeting, following the central bank's quarter-point increase in September — its first hike since 2023. Williams' remarks specifically tempered those expectations, suggesting traders anticipating an immediate follow-up hike may have gotten ahead of the actual policy timeline. Underlying inflation, driven substantially by energy costs tied to the ongoing US-Iran war and continued tariff effects, has remained the central sticking point keeping the committee's hawkish lean intact even amid otherwise solid growth and labor market data.
What's Next
With both officials still pointing toward at least one more hike before year-end, but disagreeing somewhat on the urgency of moving as soon as October, markets will be watching upcoming inflation and labor data closely to gauge whether the Fed's next move comes at its October meeting or is pushed to December. For continuing coverage, see the full report.