John Williams said there are no clear signs that current monetary policy is enough to lower inflation. #
John Williams, the chair of New York's Federal Reserve, said climbing treasury yields is a result of a strong economy, not market dysfunction.
Speaking to CNBC, Williams claimed that the situation is driven "in large part" by "really a strong U.S. economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general."
"So, I think it's not really about financial conditions affecting the economy. It's more about the economy affecting financial conditions," he added.
Government bonds continued their rout on Wednesday. The 10-year Treasury yield remained above 4.8%, levels not seen since early 2025.
Williams also addressed inflation prospects, saying there are "no clear signs right now whether monetary policy currently is sufficient to make sure we bring inflation back to target in the next year or two, or whether you need to see further action to do that."
"The [inflation] data recently have been encouraging towards that, but again we can't just look a month or two. We've got to get a full picture and and look at all the all the different pieces of information we have," Williams added.
The day prior, Fed Governor Michael Barr said he will support an interest rate hike if inflation doesn't ease.
Speaking at a banking forum in Washington, Barr, who votes on FOMC decisions, said he's concerned about "broader price pressures taking hold."
"If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."
Fed Chair Kevin Warsh also appeared to anticipate he is prepared to support a more hawkish policy if prices remain above the central bank's target.
Speaking at the Jackson Hole symposium last week, Warsh said that even though recent inflation readings have been "better than expected, they do not tell me that underlying trends have meaningfully improved." He claimed that if the trend doesn't move down in the future, the central bank will have "work to do."
However, he did not offer guidance about the central bank's next moves, speaking against "oversharing" policy deliberations.
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