New York Fed President John Williams stated that the economic consequences of the U.S. and Israel's strikes against Iran will depend on how long asset prices, particularly oil prices, remain affected. When asked about the potential impact of the conflict on U.S. inflation during a Tuesday event in Washington, Williams told reporters, "We need to see how long this situation persists." He added that the impact on financial markets has so far been "relatively mild." Oil prices surged following the joint U.S.-Israel attacks on Iran over the weekend. Investors are assessing the potential effects of a prolonged Middle East conflict on the economy and inflation, leading to increases in U.S. Treasury yields and gold prices. Earlier, while speaking at an event hosted by America’s Credit Unions, Williams indicated that if inflation slows further after the primary effects of tariffs have passed, further interest rate cuts would be warranted. In his prepared remarks, Williams said, "If inflation evolves along the path I anticipate, eventually it will be necessary to further reduce the federal funds rate to prevent monetary policy from inadvertently becoming more restrictive." He added that tariffs are expected to exert some additional upward pressure on consumer prices in the first half of this year, after which the inflation rate is projected to decline to 2.5% by the end of 2026 and reach 2% in 2027. Meanwhile, Williams noted that the labor market has shown "encouraging signs of stabilization" in recent months, and with "solid" growth, the unemployment rate is expected to continue declining modestly this year and next. He forecasts economic growth of around 2.5% this year. "Given the absence of second-round effects and well-anchored inflation expectations, I expect the price effects of tariffs to be primarily one-time," he stated, adding that the peak impact of the tariffs will pass "later this year." With the full effect of the tariffs not yet realized, progress toward the Fed's 2% inflation target has "paused temporarily." Following data showing a rebound in hiring and a lower unemployment rate in January, a growing number of Fed officials have pointed to signs of labor market stabilization. Many policymakers now prefer to wait for further evidence that inflation is returning to the Fed's 2% target. However, some other officials are concerned that job growth is not broad-based enough and may still necessitate further rate cuts. Williams remarked that the job market remains in an unusual state of "low hiring, low firing." He also noted that household surveys indicate more pessimistic views, providing a "cautionary signal" that policymakers need to monitor closely.