NY Fed President John Williams says he "strongly" supported last week's policy decision and reaffirms the reaction function he sketched out last month. He expects inflation to decline but says "it would absolutely be appropriate" to raise rates if inflation doesn't. "I am quite honestly focused quite a bit on, what are we seeing in the core inflation ​data over the next several months, and is that consistent with a kind of a run rate of inflation moving towards 2% and really on a disinflationary path consistent ​with us achieving our 2% inflation goal on a sustained basis by 2028." "My forecast personally is for inflation to come down in ⁠the second half of this year and come down further next year." "If ​the economy is not on a trajectory that will bring inflation back down to 2% ... it would absolutely be appropriate to act to get us on a trajectory that does bring inflation back ​to 2%.” via Reuters @michaelsderby

NY Fed President John Williams: Inflation is "unquestionably elevated and well above" target, reflecting tariffs, energy, and AI-related demand for tech goods. "In coming quarters, however, I expect inflation readings to edge down" for several reasons: First, tariff effects "appear to have mostly played out." Second, a base case is that Hormuz related supply disruptions "are resolved relatively soon." Third, housing inflation should continue to slow. Fourth, there's no evidence of labor-market driven price pressures. The punchline: "Given the elevated level of inflation, it is imperative that we restore it to our 2% longer-run goal on a sustained basis. The current stance of monetary policy is well positioned to do that."

An interesting exchange this morning from my colleague @greg_ip and NY Fed President John Williams: Greg asked about the idea that the Fed should raise rates "as a gesture of asserting your credibility" given how the risks are now on the inflation side? Williams: "The way you maintain the credibility that's been built up over decades is by making the best decisions you can given the data we have, rather than trying to use monetary policy to affect credibility." The words "rather than" suggest Williams doesn't agree with the premise nested behind Greg's question. And the word "maintain" perhaps implicitly rejects the idea the credibility needs a restoration.