New York Federal Reserve President John Williams stated that interest rates are at a favorable level to guide inflation back toward the central bank's target.

"Given that inflation is elevated, we must bring it sustainably back to our 2% long-term objective," Williams said in prepared remarks for an event in Jersey City on Thursday. "The current stance of monetary policy is well-positioned to achieve that."

Williams noted that inflation is "undoubtedly high," driven by tariffs, energy shocks stemming from the war in Iran, and the investment boom in artificial intelligence. He indicated that, while the impact of tariffs has largely played out and energy prices have retreated, significant risks remain.

"The surge in AI investment could push price increases beyond expectations," he said. "Furthermore, disruptions to global supply chains from conflict in the Middle East remain a source of risk to the growth and inflation outlook."

Federal Reserve officials held interest rates steady last week, but the latest projections showed nearly half of the officials anticipate raising rates by at least a quarter percentage point this year. Policymakers pointed to clear signs of stabilization in the labor market and emphasized their concern over persistent high price pressures.

Williams forecasts that inflation will slow to 3.5% by year-end, then continue to move toward 2% "along a smooth path," reaching the target by 2028. He stated that the fading effects of trade tariffs over the coming quarters should help ease inflation, while housing inflation should continue to moderate. He also added that energy and goods prices should stabilize if conflicts in the Middle East are resolved relatively quickly.

Williams canceled his planned appearance at the aforementioned event, but the New York Fed still released his prepared remarks.