Federal Reserve 'Big Three': Tariff Inflation Impact Has Peaked, AI Investment Has Not Yet Formed Bubble
BlockBeats News, August 3rd, New York Fed President John Williams stated that the Fed's decision to keep interest rates unchanged in July was in line with the current economic conditions. The labor market remains stable, economic growth is solid but without signs of overheating, therefore an immediate rate hike is not necessary.
Williams mentioned that the impact of tariffs on U.S. inflation has mostly been transmitted, and it is unlikely to significantly push inflation higher in the coming months. In a base-case scenario, the inflation pressures from energy prices and tariffs have peaked, and the factors that previously drove inflation up are expected to gradually weaken.
He stated that the Middle East conflict has caused oil prices to rise, but the market generally expects the situation to eventually ease, and prices may fall once energy trade resumes. However, there remains high uncertainty in the energy market.
Williams reiterated that he expects U.S. inflation to return to the 2% target level by 2028. He pointed out that the decline in housing costs, the easing of goods inflation, and the cooling of core services inflation will continue to drive inflation downwards.
Regarding the AI investment boom, Williams stated that he currently does not see signs of a bubble. He believes that AI is a transformative general-purpose technology, and the current investment enthusiasm reflects the market's expectations for productivity gains and new business models. However, competition among different companies and technology pathways in the future may bring market fluctuations.
Furthermore, Williams mentioned that the Fed's abandonment of forward guidance is due to the high current economic uncertainty. Policy should be dynamically adjusted based on data received at each meeting, rather than setting a predetermined path. He emphasized that the Fed will continue to independently assess economic data and steadfastly work towards achieving the 2% inflation target.
