Williams explains rise in US bond yields by strength of economy
New York Federal Reserve Bank President John Williams said that the recent sharp rise in US Treasury yields is primarily linked to strong prospects for the American economy rather than financial market dysfunction. He said this in an interview with CNBC.
Assessment of the market situation
According to Williams, government bond yields, especially long-term ones, have risen to multi-year highs amid investor expectations for inflation and economic growth. He linked these expectations to the resilience of the US economy, which, in his view, is supported by substantial investment in artificial intelligence, data centers, and the technology sector in general.
The official noted that in this situation, financial conditions do not determine the state of the economy; rather, economic prospects affect financial conditions. Williams also said that inflation expectations, in his assessment, remain well anchored.
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Interest rate decision
Williams declined to say whether the Federal Reserve needs to raise interest rates further. He stressed that the regulator should wait for new economic data to determine whether the current monetary policy is sufficient to return inflation to the target level over the next one to two years.
He described the latest inflation data as encouraging but emphasized the need to assess the full range of available information rather than indicators for just one or two months. According to the CME Group indicator, on the morning of September 2, traders put the probability of a rate increase at the September 15–16 meeting at about 66%.
As president of the New York Fed, Williams has a permanent voting right on the Federal Open Market Committee, which makes decisions on rates.
