Fed's 'third-in-command' Williams: One more rate hike this year is 'reasonable'

BlockBeats news, September 24: New York Fed President Williams said today that U.S. inflation remains significantly above the Fed's 2% target, and with energy prices elevated and AI investment driving demand to remain strong, the Fed still has "a lot of work to do" to control inflation. He believes another rate hike within the year is a "reasonable" expectation, but stressed that subsequent policy will depend on economic data.

Williams said the U.S. economy has shown resilience after major shocks, but persistent energy price pressures and strong demand brought by AI investment have increased inflation risks. He noted that U.S. inflation has been above the Fed's target for five consecutive years.

The Fed unanimously raised rates by 25 basis points last week, bringing the federal funds rate target range to 3.75%-4%. The latest dot plot shows that 16 of 18 officials expect at least one more rate hike by the end of 2026. Williams said future decisions will be made at each meeting based on the latest economic and inflation data.

The market has also further increased its bets on an October rate hike. CME FedWatch data shows that as of September 24, the market expects about a 70% probability of a Fed rate hike in October, up from about 54% the previous day.

In addition, Williams said AI investment has become a new variable on the demand side, and artificial intelligence investment may drive productivity growth in the coming years, but the actual contribution of AI to overall productivity is still relatively limited at present.