New York Fed’s Williams Says Treasury Yield Surge Reflects Strong Economy, Keeps September Rate-Hike View Open
Forecast Trend Report by Period
New York Federal Reserve President John Williams said the recent surge in U.S. Treasury yields reflects a resilient economy and stronger growth expectations, not stress in financial markets.
Williams told CNBC on September 2 that higher Treasury yields have been driven in large part by the strength of the U.S. economy and a solid economic outlook. He pointed to heavy investment in artificial intelligence, data centers and technology as key drivers.
“The economy is affecting financial conditions more than financial conditions are affecting the economy,” he said. While long-term Treasury yields have climbed to their highest levels in years, that does not necessarily signal a breakdown in market functioning.
Williams, however, stopped short of saying whether the Federal Reserve will need to raise interest rates this month. “We have to wait and see,” he said. There is still no clear signal on whether current monetary policy is enough to bring inflation back to target over the next one to two years or whether further action will be needed.
He called recent inflation readings encouraging, while stressing that policymakers need more evidence. “You can’t look at just one or two months of data,” Williams said. Officials need to judge the overall picture using a broad range of information.
Markets are leaning toward a rate increase at the Federal Open Market Committee’s September 15-16 meeting. CME data showed on the morning of September 2 that traders were pricing in about a 66% chance of a September hike.
Williams also said long-term inflation expectations remain “well anchored” even as price pressures have risen this year because of tariffs and the war involving Iran. The New York Fed president holds a permanent vote on the FOMC, the Fed’s policy-setting body.
