<p>The New York Fed President reaffirmed his stance on keeping interest rates unchanged but warned that a prolonged war would simultaneously drive up inflation and suppress economic growth.</p>
<p>John Williams, President of the Federal Reserve Bank of New York and known as the Fed's &#34;third-in-command,&#34; stated on Thursday that <strong>the current monetary policy stance is &#34;well-positioned&#34; to counter persistent supply shock risks potentially triggered by the Middle East war.</strong> He warned that this conflict could exert dual pressure by pushing up inflation while dampening economic activity.</p>
<p>In written remarks delivered at an event in New York City, Williams noted that the impact of rising energy prices has spread beyond energy commodities to goods and services, including increases in airfare, groceries, fertilizer, and other consumer products. However, he indicated that underlying inflation continues to move in the &#34;right direction.&#34;</p>
<p>Multiple Federal Reserve officials have signaled a preference for maintaining interest rates unchanged at the April 28-29 policy meeting.</p>
<h2>War Impact Pathway: Supply-Side Pressures Could Deliver a Double Blow to the U.S. Economy</h2>
<p>Williams outlined two scenarios regarding the escalation of the Middle East situation. If energy supply disruptions ease in the short term, some of the shock's impact this year may be reversed; however, if the crisis persists longer, the consequences will be far more severe.</p>
<p>&#34;This conflict could trigger a large-scale supply shock with significant effects—driving up inflation through surges in intermediate costs and commodity prices while dragging down economic activity,&#34; Williams said.</p>
<p>He further pointed out that the transmission effects of rising energy prices are already evident across multiple sectors, not only in higher fuel costs but also in increased prices for airfare, food, fertilizer, and other consumer goods due to cost pass-throughs. Nevertheless, he maintained his judgment that &#34;the current monetary policy stance is sufficient to balance the risks facing the dual mandate of maximum employment and price stability.&#34;</p>
<h2>Economic Outlook: Growth Remains Resilient, Inflation Unlikely to Return to 2% Target Before 2027</h2>
<p>Regarding the macroeconomic outlook, Williams maintained a relatively moderate baseline forecast. He projects that U.S. economic growth this year will fall between 2% and 2.5%, with the unemployment rate remaining in the 4.25% to 4.5% range.</p>
<p>On inflation, <strong>he forecasts that overall inflation will reach between 2.75% and 3% by year-end,</strong> before falling back to the Federal Reserve's 2% policy target by 2027. This projection implies that inflation will remain above the target level for a considerable period, further supporting a policy stance of maintaining stable interest rates in the near term.</p>
<h2>Labor Market: Divergence Between Hard and Soft Data</h2>
<p>Williams specifically highlighted that the labor market is sending &#34;contradictory signals.&#34; Hard data suggests job prospects remain largely stable, while soft data—such as the New York Fed Consumer Expectations Survey—indicates signs of a gradual softening in the labor market.</p>
<p>This divergence creates greater uncertainty for the Fed when assessing the health of the economy. With the situation in the Middle East and supply-side pressures still unclear, Williams' comments further reinforced market expectations that the Fed will hold interest rates steady this month.</p>

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<p>Williams stated that the current monetary policy stance is 'well-positioned' to address potential persistent supply shock risks stemming from the Middle East conflict. He forecasts that overall U.S. inflation will reach between 2.75% and 3% by year-end, economic growth will fall within the 2% to 2.5% range, and the unemployment rate will remain between 4.25% and 4.5%</p>

- The President of the New York Federal Reserve, John Williams, stated that the current monetary policy is well-positioned to address supply shocks from the Middle East conflict, warning that prolonged war could increase inflation and suppress economic growth.  
- He noted rising energy prices are affecting the costs of various goods and services, although underlying inflation is reportedly trending in the right direction.  
- Williams predicts U.S. economic growth will be between 2% and 2.5% this year, with inflation expected to stay above the 2% target until 2027, amidst conflicting signals in the labor market.

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Fed's 'Third-in-Command': Monetary Policy 'Well-Positioned' to Counter Supply Shock Risks from Middle East War