Williams says tariff effects on inflation should begin to dissipate later this year.
“Inflation remains somewhat elevated due to the effects of tariffs, but those effects should begin to dissipate later this year.”
Williams forecasts 2.5 percent GDP growth this year with unemployment edging down through next year.
“With growth running above potential, I expect the unemployment rate to edge down over this year and next.”
Williams expects tariff effects on aggregate data to increase in coming months despite modest impacts so far.
“All in all, although we are only seeing relatively modest effects of tariffs in the hard aggregate data so far, I expect those effects to increase in coming months.”
Williams expects inflation to stay above 2 percent for the next few quarters due to tariffs and energy prices.
“I expect inflation to remain elevated and above the FOMC’s longer-run 2 percent goal for the next few quarters, largely due to those two factors.”
Williams says economic growth will naturally increase demand for Federal Reserve liabilities including currency and reserves.
“After that, growth in the economy will naturally result in increasing demand for Federal Reserve liabilities, including currency and reserves.”
Williams says real GDP grew 2 percent in 2025 and expects that pace to continue this year.
“Real GDP grew 2 percent in 2025 and is poised to maintain that pace for the rest of this year.”
Williams expects uncertainty, tariffs, and reduced immigration to restrain spending and labor force growth.
“But based on what the data tell us today, I expect uncertainty and tariffs to restrain spending and reduced immigration to slow labor force growth.”
Williams expects inflation around 2.75 percent this year, reaching 2 percent target in 2027.
“And with various short-term factors affecting prices, I expect overall inflation to come in at around 2-3/4 percent this year, before reaching our longer-run 2 percent target in 2027.”
Williams forecasts inflation of 3 to 3.5 percent in 2025, declining to 2 percent by 2027.
“I anticipate inflation will come in between 3 and 3-1/2 percent in 2025, and then fall back to about 2-1/2 percent next year before reaching 2 percent in 2027.”
Williams expects Fed to reach ample reserves soon based on sustained repo market pressures.
“Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves.”
Williams anticipates tariff pass-through to prices will mostly complete in the next few months.
“I anticipate the pass-through of current tariffs to prices to be mostly completed in the next few months and therefore their effects on the inflation rate to fade.”
Williams says the Fed will resume growing the balance sheet when reserves reach ample levels.
“When market conditions suggest reserves are ample, we will provide those liabilities by beginning to grow our balance sheet once again.”