On January 12, 2026, John Williams, President and CEO of the Federal Reserve Bank of New York, delivered an optimistic message during remarks prepared for a Council on Foreign Relations event in New York City. He stated that current interest rates are well-positioned to support sustainable job creation, economic growth, and the Fed’s long-term 2% inflation target.
Williams highlighted that the FOMC’s cumulative 75 basis point rate cuts in 2025 have given policymakers better control over risks to the dual mandate. He emphasized that the labor market has gradually returned to pre-pandemic balance, with no signs of sudden layoffs or sharp deterioration.
Williams addressed potential inflationary pressures from President Trump’s import tariffs, describing their impact as likely one-time rather than persistent. He projected inflation peaking between 2.75% and 3% in the first half of 2026 before settling back toward 2.5% for the remainder of the year, while expecting above-average economic growth to continue.
This relatively benign tariff view contrasts with concerns raised by some Fed officials about sustained price pressures.
The December 2025 FOMC minutes, released on December 30, revealed a closely divided committee. Several policymakers who supported the latest quarter-point cut described their decision as “very close” and said they could have easily voted to hold rates steady.
The minutes underscored ongoing caution among some members. Following the release, market-implied odds of a rate cut at the January 2026 meeting dropped sharply to around 15%.
Stephen Stanley, Chief U.S. Economist at Santander US Capital Markets, noted that the narrow vote in favor of easing continues to reflect Jerome Powell’s strong influence over the committee.
Markets are likely to remain range-bound until clearer signals emerge from Powell’s upcoming appearances and incoming economic data.
