The NY Fed's top vote-holder has a surprising read on the bond market's latest move
Federal Reserve Bank of New York President John Williams pushed back Wednesday against mounting market anxiety over surging Treasury yields. Speaking on CNBC, he argued the move reflects a resilient US economy, not financial dysfunction. His remarks leave the September rate decision wide open for mortgage professionals tracking borrowing costs.
Speaking on "Squawk Box" from the New York Fed's lower Manhattan headquarters, Williams tied the jump in long-end bond yields directly to technology investment and economic momentum, not inflation fears or market dysfunction.
"What's driving it, in large part, is really a strong US economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general," Williams told CNBC's Steve Liesman.
"It's not really about financial conditions affecting the economy. It's more about the economy affecting financial conditions."
Wait-and-see on September's rate call
Williams, a permanent voter on the rate-setting Federal Open Market Committee (FOMC), declined to pre-commit to a move at the September 15–16 meeting, where traders are currently pricing roughly 66% odds of a hike, according to the CME Group's FedWatch tool.
The Fed has held its benchmark rate in a 3.5%–3.75% range through five consecutive decisions in 2026.
"I think that we have to wait and see," he 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 ambiguity puts real pressure on mortgage professionals. The 30-year fixed-rate mortgage has been approaching its 2026 peak as Treasury yield pressure builds, with the Mortgage Bankers Association projecting rates in the 6.1%–6.3% range through year-end.
Meanwhile, Federal Reserve Governor Michael Barr signaled Tuesday he would back an interest rate increase if incoming inflation data fall short of convincing progress toward the central bank's 2% target.
Inflation anchored, but the risk is real
Williams acknowledged that tariffs and the US-Iran conflict have kept inflation above the Fed's 2% target but described longer-term expectations as "well anchored."
He cautioned against reading too much into short-run improvements in the data. "The data recently have been encouraging towards that, but again we can't just look at a month or two," he said.
Fed Chair Kevin Warsh separately signaled in a Friday speech a readiness to tighten further if price pressures required it, a stance that has reinforced the hawkish mood and driven growing concern among brokers that a rate hike could be imminent.
Williams also addressed Treasury Department efforts to contain yield moves, dismissing suggestions they complicated the Fed's task. "It doesn't complicate my job or our job making monetary policy," he said.
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