Federal Reserve Bank of New York President John Williams indicated that additional interest-rate cuts are likely if inflation continues to decline once tariff effects fade. Speaking in Washington, Williams said further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from becoming inadvertently restrictive.

Williams expects tariffs to temporarily boost consumer prices through the first half of the year before inflation declines to 2.5% by the end of 2026 and reaches the Fed's 2% target in 2027. He noted promising signs of stabilization in the labor market, with the unemployment rate expected to edge down this year and next, supported by solid economic growth of around 2.5%.

The New York Fed president emphasized that tariffs should have one-off effects on prices rather than creating persistent inflation, with the peak impact passing later this year. However, he acknowledged that progress toward the 2% inflation goal has temporarily stalled as the full impact of tariffs is yet to be felt.