NY Fed President Williams Raises 2026 Inflation Forecast to 3%

John Williams, president of the Federal Reserve Bank of New York, warned in his latest economic outlook speech that the fight against inflation may become more challenging than expected, according to his remarks. Williams announced an inflation forecast of 3 percent for 2026, with price increases expected to slow to 2 percent in 2027—a more upward trajectory compared to his earlier assessment of 2.75–3 percent.

Inflation Forecast Revision

Williams' updated forecast reflects a shift in economic expectations. The revised 3 percent estimate for 2026 represents an increase from his previous range, indicating a slower-than-initially-anticipated decline in price pressures.

Tariff Policy Reassessment

Williams also signaled a notable change in his assessment of trade policy impacts. In April, he had stated that the impact of tariffs would diminish over time and put downward pressure on core inflation. However, in his latest assessment, Williams acknowledged that while the price impact of current tariffs will largely be completed in the coming months, a new wave of tariffs could be introduced, creating additional upward pressure on import prices.

Artificial Intelligence and Interest Rates

Williams addressed the economic effects of artificial intelligence technologies, stating that AI could increase productivity and investment, which could push the "neutral interest rate" higher in the economy. He assessed this rate to be around 1 percent currently, noting a "struggle" between the downward pressure of demographic factors and the upward impact of AI and increased productivity.