Williams Sees Inflation Falling to 3.25% in 2026 as Fed Rates Stay Well Positioned
Updated
Updated · CNBC · Jul 15
Williams Sees Inflation Falling to 3.25% in 2026 as Fed Rates Stay Well Positioned
2 articles · Updated · CNBC · Jul 15
Summary
John Williams said inflation has likely peaked and the Fed can keep rates unchanged for now, projecting overall inflation will slow to about 3.25% by year-end before reaching 2% in 2028.
Five factors support that view, he said: the oil-price spike after the late-February Iran conflict is easing, tariff effects should not add much more pressure, AI-related supply imbalances should recede, the labor market is not driving inflation, and expectations remain anchored.
June CPI strengthened that case after a sharper-than-expected 0.4% monthly drop cut annual inflation to 3.5%, the biggest one-month decline since April 2020.
Markets still lean toward a September rate hike, and June Fed projections narrowly showed one 25-basis-point increase by year-end, while Chair Kevin Warsh said the latest price drop was not a 'mission accomplished' moment.
With Fed officials deeply divided, will a rate hike or a steady hold define America's economic future?
Why does the Fed see stable inflation expectations while consumers brace for multi-year price highs?
Is the massive investment in AI a temporary inflation driver or a permanent challenge for central banks?
Inflation Above Target: The Fed’s Delayed 2% Goal Amid Energy Shocks and Economic Uncertainty
Overview
As of mid-2026, the U.S. economy is showing solid growth and a stabilized job market, but inflation remains stubbornly high, reaching its highest level since 2023. This persistent inflation is driven in part by the Iran War, which has pushed up fuel costs. These soaring fuel prices lead to higher transportation expenses, which businesses then pass on to consumers, causing prices to rise across many goods and services. As a result, core inflation measures like PCE continue to climb, and experts expect inflation to stay elevated, prompting the Federal Reserve to consider further interest rate hikes to restore price stability.