New York Federal Reserve President John Williams said Wednesday that the recent run-up in Treasury yields is a sign of economic strength rather than a sign that something is broken in the bond market.
Speaking to CNBC’s Steve Liesman on “Squawk Box” from the Fed’s offices in lower Manhattan, Williams said he is still absorbing incoming data and would not commit to whether he thinks the central bank needs to raise its benchmark interest rate again.
“I think that we have to wait and see,” Williams said. “There’s no clear signs right now whether monetary policy currently is sufficient to make sure we bring inflation back to target in the next year or two, or whether you need to see further action to do that.”
The New York Fed chief acknowledged that recent inflation readings have been “encouraging,” but cautioned against reading too much into a short stretch of data. “We can’t just look a month or two. We’ve got to get a full picture and look at all the different pieces of information we have,” he added.
Yields at multi-year highs
One of the dominant stories in financial markets of late has been the surge in Treasury yields to multi-year highs, especially at the long end of the curve, where investors are pricing in expectations for economic growth and inflation. The move has rattled some corners of Wall Street and reignited debate about whether the Fed’s policy stance is tight enough.
Williams, however, pushed back on the narrative that the yield spike reflects dysfunction or financial stress. Instead, he pointed to the underlying fundamentals.
“What’s driving it, in large part, is … really a strong U.S. economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general,” he said. “So, I think it’s not really about financial conditions affecting the economy. It’s more about the economy affecting financial conditions.”
The comments come as traders have boosted expectations for a rate increase at the Federal Open Market Committee’s September 15-16 meeting, with odds hovering around 66% on Wednesday morning, according to the CME Group’s gauge.
Inflation expectations ‘well-anchored’
Williams also downplayed worries that the recent climb in prices — driven partly by tariffs and the Iran War — has destabilized long-run inflation expectations. He described those expectations as “well-anchored” despite the inflationary pressures that have emerged this year.
As president of the New York Fed, Williams is a permanent voter on the rate-setting Federal Open Market Committee, giving his remarks added weight in the debate over the next policy move.
Source: www.cnbc.com — https://www.cnbc.com/2026/09/02/new-york-feds-williams-says-yield-surge-due-to-strong-economic-prospects.html
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