[On-Site] New York Fed President: "Not Time for a Rate Cut Now... Iran War Uncertainty Remains Very High" (Comprehensive)

John Williams, President of the New York Federal Reserve. New York (USA) - Photo by Yoonju Hwang

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John Williams, President of the Federal Reserve Bank of New York, stated on the 16th (local time), “Before the Iran war, I believed that an interest rate cut would be necessary if inflation returned to 2%. However, now inflation is rising, so that situation (a rate cut) is not the case.”

President Williams met separately with reporters, including those from The Asia Business Daily, at the “2026 FHLBNY Symposium” held in Manhattan, New York, on the morning of the same day. He said, “At this moment, we are at the stage of evaluating the impact of various variables, such as tariffs, geopolitical risks, and war.”

When asked, “Ahead of the April Federal Open Market Committee (FOMC), should the market expect a rate cut, or should there also be openness to a possible rate hike depending on inflation?” President Williams explained, “The current policy stance is moderately restrictive, which is helping guide inflation in the right direction.”

He added, “Given the high level of uncertainty, it is not appropriate to provide strong forward guidance.”

He emphasized, “Currently, we are experiencing two types of supply shocks: one due to the Middle East war, and the other due to structural changes driven by artificial intelligence (AI). Therefore, it is important to maintain the current policy and evaluate the situation.”

John Williams, President of the New York Federal Reserve, after delivering the keynote speech at the 2026 FHLBNY Symposium on the 16th (local time), is seen conversing with reporters including those from The Asia Business Daily. New York, USA ? Photo by Yoonju Hwang

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When asked, “You said the duration of rising energy prices is important. If the Iran war ends in April, can concerns about inflation and slowing growth also be eased?” President Williams responded, “There is no specific threshold (regarding the period),” but explained, “There is a big difference between a few weeks, a few months, and several quarters (of sustained high oil prices). The longer the period of high oil prices persists, the greater the economic impact.”

However, President Williams pointed out that Asian countries with a high dependence on Middle Eastern energy are more affected by disruptions in energy supply. He said, “Various inputs required in manufacturing and agriculture, such as fertilizer and helium, could also be impacted. In other words, not just price, but the shortage of supply itself is a major issue. Disruptions in maritime transport and the time needed for infrastructure recovery also all have an impact.”

In his keynote speech at the 2026 FHLBNY Symposium just prior, President Williams also stated, “If the Middle East conflict intensifies, it could lead to a significant supply shock that both raises inflation through increases in intermediate goods and raw material prices, and slows economic activity.”

He explained that, so far, there have been no widespread supply chain bottlenecks, but disruptions in the supply of energy and related commodities are increasing. He pointed out that these cost increases are being passed on not only to fuel expenses but also to airfares, groceries, fertilizer, and other consumer goods.

Vegetables displayed at a market in Manhattan, New York. New York (USA) - Photo by Yoonjoo Hwang

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When asked, “If medium- to long-term inflation expectations remain stable in a short-term inflationary situation, to what extent can you tolerate price increases?” he replied, “It is not a situation where I can say I’m ‘comfortable.’ However, it is important to check the direction based on the data, and the fact that medium-term inflation expectations are well anchored is a significant positive factor.”

President Williams has previously emphasized the importance of keeping medium- to long-term inflation expectations stably anchored. As oil prices have soared in the aftermath of the Iran war, a rise in short-term inflation is inevitable, but if inflation expectations remain stable, the shock from high oil prices could end up being temporary.

President Williams said, “Considering the rise in energy prices, I expect that over the next few months, the 12-month Personal Consumption Expenditures (PCE) inflation rate will stay well above 3%. The main focus is on core inflation. Since core inflation is also currently around 3%, we are also monitoring the effects of tariffs on import prices, housing cost inflation, and prices of core non-housing services.”

In the United States, the PCE index for February increased by 0.4% from the previous month and by 2.8% compared to the same month a year earlier. Excluding energy and food, core PCE rose by 0.4% from the previous month and by 3.0% year on year. The core PCE inflation rate had dropped to as low as 2.6% in April last year, but after rebounding, it is still staying above 3%.

The PCE Price Index is an inflation indicator that measures the prices paid by U.S. residents for goods and services. The Federal Reserve pays closer attention to PCE than the Consumer Price Index (CPI) when determining whether it is achieving its 2% inflation target.

President Williams said, “The main thing I focus on is whether the underlying inflation trend is moving in the right direction, but recent data is mixed. Some core prices are higher than expected, and lower tariffs could bring prices down. At the same time, there is a possibility that rising energy prices could be passed on to core inflation.”

New York Stock Exchange. New York, USA - Photo by Yoonju Hwang

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Regarding the New York stock market, which recently hit record highs, he said, “The market is currently at a stage where it is trying to assess how long the Iran war will last and what impact it will have.”

He added, “When talking to market participants, many believe that the Iran war will end relatively quickly. So, there are strong expectations that energy prices will fall again. Therefore, it appears that the market is reflecting a relatively ‘calm scenario.’”

President Williams cited “optimism about AI” as an indispensable factor when explaining market movements. He said, “The current economy is exhibiting solid growth, and corporate earnings prospects are very strong. On top of that, expectations for returns on AI investment are further supporting high asset valuations (rising stock prices).”

He continued, “What’s interesting is that there are very clear differences between the U.S., Europe, and Asia. While the European and Asian economies are more exposed to rising energy prices, the U.S. is relatively less affected. I believe this is also reflected in the market.”

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