Federal Reserve Bank of New York President John Williams said the central bank will raise interest rates if needed to bring inflation back to its 2% target, according to his Reuters interview. He expects inflation pressures to ease gradually if energy prices and trade tariffs have peaked and the economy remains strong. Williams noted that current interest rate policy is "well positioned" to return inflation to target, though he acknowledged that inflation has remained above 2% for more than five years.

The Fed's preferred inflation measure rose 3.7% year-over-year in June, while the federal funds target range remained unchanged at 3.50%-3.75% last week. Williams strongly supported the decision to hold rates steady, despite three Fed officials dissenting and calling for further rate hikes to combat inflation.

Williams emphasized his focus on core inflation data over the coming months to assess whether inflation is moving sustainably toward the 2% goal by 2028. He also highlighted uncertainty around the economic outlook, particularly regarding energy prices amid renewed Middle East conflict. The Fed will not set monetary policy based on market levels, though it closely monitors financial markets.