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New York Fed President John Williams said on Sept. 29 that U.S. economic momentum remains solid, with growth near 2% and a labor market he described as firm. He said inflation is 3.7%, above the Federal Reserve’s 2% longer-run goal, citing energy and supply pressures and strong AI-related demand among the drivers.
New York Federal Reserve President and CEO John C. Williams said Sept. 29 that the U.S. economy retains solid momentum but inflation remains too high, at 3.7% against the Fed’s 2% longer-run goal. His remarks at the University at Buffalo set out his assessment of growth, employment and the forces keeping prices elevated; Williams stressed that the views were his own, not necessarily those of the Federal Open Market Committee.
Williams said real gross domestic product had grown at about 2% over the past year, while productivity growth was above pre-pandemic levels and business investment had surged, supported by the buildout of artificial-intelligence infrastructure. He said consumer spending was robust, particularly among higher-income households and homeowners. The speech characterized these indicators as evidence of solid underlying momentum despite large shocks and elevated uncertainty.
He argued that the economy’s growth rate is constrained by slower growth in the labor force and productivity below the pace of the late-1990s and early-2000s boom. In that earlier period, Williams said, the labor force grew by more than 1% annually and productivity averaged 3% a year. He put recent productivity growth just above 2% and said imported goods used in AI investment contribute less to U.S. GDP than domestic production would.
Williams described the labor market as solid and said some measures had strengthened at the margin. He cited an unemployment rate that had edged down to its level in the first half of 2025, near-historic-low layoff rates, positive payroll gains and some improvement in survey measures of job and worker availability. For the Second District, he said the New York Fed’s business surveys pointed to a solid pickup in manufacturing employment and steady employment in services.
Growth Holds as Inflation Exceeds Target
Williams’ assessment matters because it describes a difficult balance for monetary policy: economic activity and employment are holding up, while inflation remains well above the Fed’s stated longer-run objective. The speech does not announce a policy decision, but it lays out the conditions relevant to the Fed’s dual mandate of maximum employment and price stability.
His account also distinguishes between sources of inflation that may ease and those still adding pressure. Williams said tariffs were no longer adding to goods-price inflation, though new tariffs could change that. By contrast, he said energy-market pressures and demand for goods linked to AI investment remained concerns. For households and businesses, these pressures can affect fuel costs and the prices or availability of goods; the speech did not quantify their separate effects.
Williams said AI-related investment could eventually lift productivity and the economy’s potential, but cautioned that realizing those benefits may take time. That qualification matters: strong investment and stock-market gains do not by themselves establish how much lasting productivity growth will result.
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The Fed’s Growth and Inflation Measures
Williams delivered the remarks at the University at Buffalo in Buffalo, New York, on Sept. 29, 2026, during a visit that included meetings with students and local and regional leaders. The Bank for International Settlements published the speech on Oct. 5. Williams noted that his comments were prepared for delivery and said they represented his views alone.
The speech framed the outlook around the Federal Reserve’s two goals: maximum employment and price stability. Williams said the Fed defines price stability as 2% inflation over the longer run. He put current inflation at 3.7% and said it had risen by about one percentage point over the previous year and a half. He identified higher tariffs on imported goods, supply-chain disruptions and higher energy and commodity prices associated with conflicts, and strong demand for some goods and services tied to AI investment as the three primary drivers.
On energy, Williams pointed to conflict in the Middle East and constraints in oil refining as factors pushing up crude prices and the price spreads for refined products such as gasoline and diesel. He said AI-related demand was also outpacing available supply in certain categories. These are Williams’ explanations for inflation developments, not a full breakdown of the contribution from each factor.
“Focus on the totality of the data.”
— John C. Williams, president and CEO of the Federal Reserve Bank of New York
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Inflation Drivers and AI Payoff
The speech does not say how much each cited factor contributed to the reported 3.7% inflation rate, or how quickly the remaining pressures might fade. Williams said tariffs were no longer adding to goods-price inflation, but warned that this could change if new tariffs are imposed. The duration and scale of energy-market disruptions and refining constraints also remain uncertain.
It is also unclear how much AI investment will translate into sustained productivity growth, and when any gains would show up in economic data. Williams said the benefits may take time to be fully realized. His remarks do not provide a new forecast for inflation or growth, nor do they specify a preferred interest-rate decision.
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Data and Fed Deliberations Ahead
Williams’ remarks leave the outlook dependent on incoming evidence about prices, employment, energy costs and productivity. The next developments to watch are whether inflation moves closer to the Fed’s 2% longer-run goal, whether labor-market conditions continue to hold up, and whether the pressures Williams identified—particularly energy costs and AI-related demand—persist.
The speech itself set no timetable for those developments and announced no policy action. Williams said his views were his own; any Federal Reserve decision would be made through the appropriate policymaking process, with the FOMC’s position distinct from this individual assessment.
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Key Questions
What did John Williams say about the U.S. economy?
He said the economy’s underlying momentum was solid, with real GDP growth at about 2% over the past year, productivity above pre-pandemic levels and strong business investment.
What inflation rate did Williams cite?
Williams put inflation at 3.7% and said it was too high relative to the Fed’s 2% longer-run goal.
What factors did Williams identify as contributing to inflation?
He cited tariffs on imported goods, supply-chain disruptions and higher energy and commodity prices linked to conflicts, and robust demand for some goods and services associated with AI investment. He said tariffs were no longer adding to goods-price inflation at the time of his remarks.
Did Williams announce a change in interest rates?
No. The speech assessed the economy and inflation but did not announce a rate decision. Williams said his views did not necessarily represent those of the FOMC.
Source: primary
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