Fed’s Williams says inflation stubbornly high and Fed still has work to do on policy

New York Fed President John Williams said inflation remains stubbornly high and that the Federal Reserve still has work to do on policy, signaling that the central bank is not yet prepared to declare victory on disinflation. The message points to a transmission channel through inflation repricing: if markets read the comments as delaying rate cuts, real yields and the expected path of policy rates shift higher, which tightens financial conditions and tends to strengthen the dollar while weighing on long-duration assets. Rate-sensitive segments such as Treasuries at the front and belly of the curve, growth-oriented equities with high valuations, and gold are most exposed, since their pricing is tightly linked to expectations for real rates. Traders will focus on the next monthly CPI and PCE inflation releases, particularly core services ex-housing readings, to judge whether the disinflation trend has stalled or is still intact.

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