Fed signals possible year-end rate hike

Following the 25-basis-point rate increase in September, Williams said there was no urgency to make another move and that the Fed had time to gather more economic data. After his remarks, market expectations for a rate hike at the Fed’s October meeting fell from around 70% to approximately 50%.

Williams said that if the economy develops as expected, a rate hike toward the end of the year could help bring inflation back toward the 2% target. He noted that conflicts in the Middle East and strong demand driven by artificial intelligence investment were putting pressure on inflation. Williams expects US inflation to reach 3.5% in 2026, remain slightly above the 2% target in 2027 and return to target in 2028.