Fed's Williams: Labor market not adding to inflation pressures

• Williams sees 'substantial risk and high uncertainty' in the economic outlook, especially from the Middle East conflict, which could cause a 'large supply shock'.
• He expects tariffs and higher energy prices to 'raise headline inflation in the short-term', but believes these effects should reverse assuming hostilities end and prices come down.
• The economy is viewed as 'resilient' with GDP growth close to 2.5% this year, unemployment 'edging down', and inflation projected to be 2.75% in 2026, falling to 2% in 2027.
• Williams notes 'no sign tariff increases are spilling over to the rest of the economy' and the 'labor market is not adding to inflation pressures', though he sees 'mixed signals on employment' and is 'concerned about job market expectations'.

New York Fed President John Williams acknowledges substantial risk and high uncertainty in the economic outlook, particularly from the Middle East conflict and potential supply shocks. While he expects short-term headline inflation to rise due to energy prices and tariffs, he remains optimistic that these effects will reverse. He foresees a resilient economy with 2.5% GDP growth this year and inflation returning to 2% by 2027, with the labor market not adding to inflationary pressures.