Fed Official Sees Policy Positioned to Weather AI-Driven Inflation

Federal Reserve Bank of New York President John Williams said policy remains well positioned to bring inflation back to 2% even as AI-driven demand could push prices higher. He expects AI-related supply-demand imbalances to recede as more supply comes online, with inflation peaking and then easing in coming quarters. Williams projects inflation around 3.25% by year-end and returning to 2% by 2028, as shelter and energy inflation trend down and the labor market stays resilient. He also cautioned that the magnitude and duration of AI’s inflation effects are uncertain, that policymakers are divided on near-term rate moves, and that tariffs are not expected to pressure consumer prices.