Fed deputy chair Williams: Inflation has peaked! The Federal Reserve’s interest rate positioning is “well calibrated,” with a rate cut expected to 3.25% by year-end

US Inflation Cooldown Adds Further Proof! According to CNBC, John Williams, president of the New York Federal Reserve Bank, delivered a speech today and clearly stated that multiple signs indicate inflation has already “peaked,” and that the current level of interest rates is “well positioned.” He expects inflation by year-end to fall to 3.25% and cited five main reasons—such as oil prices pulling back and increased AI supply—releasing policy signals that are relatively dovish.
(Background: Inflation cools again and confirms! US June PPI fell 0.3% month-over-month, hitting a recent low, with energy plunging 6.4% as the main cause.)
(Additional context: Fed’s new chair, Hsu, first testifies before Congress: “zero tolerance” for high inflation, calling out AI investment as the biggest economic bright spot.)

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• 5 reasons inflation is in sight of a peak, with year-end estimate falling to 3.25%
• Solid economy and labor market; current interest rates are “well positioned”
• Market still prices in a rate hike in September; Fed chair is cautious

The cooling of US inflation data is giving the Federal Reserve (Fed) officials more confidence. On July 15, 2026, in Taipei time, John Williams, president of the New York Federal Reserve Bank, delivered remarks in a speech to local business leaders, releasing easing signals that excited the market. He clearly said that this wave of high inflation has “already reached its peak,” and that the Fed can currently maintain interest rates unchanged.

5 reasons inflation is in sight of a peak, with year-end estimate falling to 3.25%

For the future trajectory of prices, Williams provided a concrete forecast roadmap. He expects overall US inflation to fall to about 3.25% by the end of this year, continue declining in 2027, and ultimately reach the Fed’s long-term target of 2% in 2028.

To support the argument that “inflation is already peaking,” he laid out five key reasons: first, oil prices likely reached a peak due to heightened Middle East geopolitical tensions and will pull back; second, after existing tariffs expire, the replacement measures will not bring additional significant shocks; third, although artificial intelligence (AI) and technology investment temporarily boosted inflation, as supply-side increases continue, imbalances between supply and demand are gradually easing; finally, the currently solid labor market is not becoming a source of inflation, and market inflation expectations are “firmly anchored,” giving policymakers ample room to maneuver.

Solid economy and labor market; current interest rates are “well positioned”

“Economic growth is steady and consistent with the trend, and the labor market is also solid.” Williams stressed in his speech that although inflation is still above the ideal level, the Fed must continue working to bring it back to the 2% target. Still, he believes the current monetary policy stance is “very well positioned” to accomplish that task.

Wall Street largely interpreted these remarks as relatively dovish, meaning the official—who has an important voting role at the Fed’s decision-making core (FOMC)—believes the current level of restrictive interest rates is already sufficient, and there is no need to rush into further rate hikes to rein in the economy.

Market still prices in a rate hike in September; Fed chair is cautious

Notably, one day before this speech, the US released its June Consumer Price Index (CPI). The data unexpectedly dropped 0.4% month-over-month, marking the largest single-month decline since April 2020, and the year-over-year rate also fell to 3.5%.

Although the data is encouraging and Williams is optimistic, the market and some officials remain highly alert. According to the June dot plot forecast, FOMC members still—by a slim majority—expect another 1 notch (0.25 percentage points) hike by year-end, and the market also largely focused on the September rate meeting. In addition, Kevin Warsh, the Fed’s newly appointed chair, also took a cautious tone at a congressional hearing recently, emphasizing that price declines “do not mean the job is done,” showing that within the Fed, there is still a step-by-step approach rather than announcing victory over inflation too soon.