Federal Reserve Bank of New York President John Williams said recent data suggests inflation might have hit its high point, pointing to the June Consumer Price Index decline as a key signal. The statement, made during a public appearance, marks the first time a top Fed official has openly described the inflation spike as possibly cresting.
What the June CPI data showed
The Labor Department reported last week that the CPI rose 3% year-over-year in June, down from 3.3% in May and well below the 9.1% peak in June 2022. The month-over-month figure actually fell 0.1%, the first decline since May 2020. Gasoline prices, which had been a major driver, dropped sharply. Core CPI, which strips out food and energy, also cooled, rising 3.3% on an annual basis — the smallest increase since April 2021.
Economists had expected a softer reading, but the magnitude of the slowdown surprised many. The data gave the Fed some breathing room after a year of aggressive rate hikes.
Williams' take on the inflation trajectory
Speaking at an event in New York, Williams called the June numbers “encouraging” and said they align with the Fed’s view that inflation is on a downward path. He didn’t declare victory, though. “We’re seeing progress, but we’re not there yet,” he said, according to prepared remarks. The central bank’s preferred inflation gauge, the personal consumption expenditures index, still runs above its 2% target.
Williams stressed that the Fed needs to see a sustained pattern of cooling before it can confidently say inflation is under control. “One month of good data doesn’t make a trend,” he noted. Still, his language was notably more optimistic than in recent months, when he and other officials repeatedly warned that inflation remained too high.
What this means for the next Fed meeting
The Fed’s next policy meeting is set for July 30-31. Markets are now pricing in a near-certainty that the central bank will hold rates steady, according to CME FedWatch data. Just a month ago, the odds of a cut were below 50%.
Williams didn’t explicitly say what he’d vote for. He said the Fed would continue to make decisions “meeting by meeting” based on incoming data. But his tone suggested the bar for another rate increase is rising. The Fed has kept its benchmark rate at 5.25%-5.50% since July 2023.
Some analysts think the Fed could start cutting rates as soon as September, but Williams didn’t endorse that timeline. “We need to be confident that inflation is moving sustainably toward 2%,” he said. “That’s not something we know yet.”
Risks that could derail the progress
Williams also flagged potential headwinds. Geopolitical tensions, supply chain disruptions, or a rebound in energy prices could rekindle inflation. The job market remains strong, with unemployment at 4.1%, which could keep upward pressure on wages.
Housing costs, a sticky component of CPI, have been slow to moderate. Shelter inflation ran at 5.2% annually in June, though it’s been decelerating. Williams said the Fed is watching that closely.
For now, the central bank appears in a wait-and-see mode. The next major data point will be the July jobs report, due August 2, and the July CPI release, scheduled for August 14. Both could shift the Fed’s calculus before the September meeting.
