MW Fed's Williams says tariffs are pushing up inflation, and he expects even higher prices in coming months

By Greg Robb

Ahead of July 29-30 policy meeting, New York Fed president defends central bank's wait-and-see stance

Higher tariffs put in place by the Trump White House this year have started to increase inflation, and these effects are likely to increase in the coming months, New York Fed President John Williams said Wednesday.

"Overall, I expect tariffs to boost inflation by about 1 percentage point over the second half of this year and the first part of next year," Williams said in evening remarks to the New York Association for Business Economics.

Williams and other Fed officials tried to maintain a sense of normalcy on Wednesday even though events surrounding the central bank were anything but.

Markets gyrated in late-morning trading Wednesday due to speculation that President Donald Trump was going to fire Fed Chair Jerome Powell. Trump later said he was "not planning" such a move.

Trump and his allies claim tariffs are not causing inflation, with the president going so far to say "inflation is dead," and Trump has called on the Fed to slash interest rates. The central bank's benchmark rate is in the range of 4.25%-4.5%. Trump wants to see rates closer to 1%.

Asked for his reaction to the turmoil in Washington and markets, Atlanta Fed President Raphael Bostic said in an interview on the Fox Business Network that he was trying "not to spend a lot of time focusing my energy on that."

"We get lots of announcements, lots of things [said] about the Fed all the time," he added.

The Fed's interest-rate-setting committee will meet on July 29-30. Markets see little chance of any rate cut at that meeting. Neither Williams nor Bostic said anything Wednesday to alter those expectations.

Tim Duy, chief economist at SGH Macro Advisors, said the Fed is on hold as it awaits inflation data for July and August.

Duy said he thinks Powell is positioning the Fed for rate cuts this fall. The median forecast of Fed officials is for two rate cuts this year, but a sizable majority see no cuts at all.

Both Bostic and Williams said the June inflation data released earlier this week showed upward pressure on inflation.

"This most recent CPI...headline number has moved away" from the Fed's 2% inflation target, Bostic said. "If you just look from May to June, we saw the highest prices we've seen all year," he added.

In his speech, Williams said the Fed's favorite inflation gauge - the personal-consumption expenditure price index - likely ticked higher in June from May. That data doesn't come out until after the Fed's next meeting, but Williams was able piece together how much the gauge is likely to rise using the consumer and producer price indices released this week.

When Bostic was asked if he would cut rates at the moment, he replied "Right now, I would wait."

"I've actually come to the view that it may be several months more, maybe into 2026, before we see the full effect" of tariffs on inflation, Bostic added in the interview on Fox Business's "The Claman Countdown."

For his part, Williams forecast that inflation would come in between 3% and 3.5% this year. That's up from a 12-month rate of 2.3% in May. Prices could come down next year to a 2.5% rate, he said.

Williams, who is part of Powell's inner circle of advisers, said it was "entirely appropriate" for the Fed to maintain rates at current levels.

"It allows for time to closely analyze incoming data, assess the evolving outlook and evaluate the balance of risks to achieving our dual mandate goals," Williams said.

Fed officials will stop speaking publicly this weekend in order to prepare for their policy meeting.

-Greg Robb

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July 16, 2025 19:11 ET (23:11 GMT)

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