Federal Reserve Bank of New York Chairman and Chief Executive Officer John Williams during a Bloomberg Television interview in New York, U.S., on Tuesday, April 7, 2026.
Michael Nagel | Bloomberg | getty images
New York Fed President John Williams on Thursday expressed concern about the impact of the Iran war on the economy, saying there are already signs of rising prices and slower growth.
In a speech to bankers in his home district, Williams said the conflict had “intensified uncertainty” around national and local situations.
While he expressed general confidence that growth will continue and inflation will moderate over the course of the year, he said there are risks to both sides of the Fed’s dual mandate for stable prices and low unemployment.
“Assuming that energy supply disruptions will subside soon, energy prices should decline, and these impacts should partially subside later this year,” Williams said. “However, this conflict could result in a massive supply shock that could have pronounced knock-on effects that simultaneously drive up inflation – through increases in intermediate costs and commodity prices – and slow economic activity. This is already beginning to be seen.”
Such a situation – slow growth and high prices – is commonly known as stagflation and presents a toxic mix for central bank policymakers, who will be left to choose which side to prioritize.
Fed Chair Jerome Powell recently rejected that characterization for the U.S. economy, but Williams’ comments indicate it remains a matter of concern for policymakers, if in less of a sense than the dire episodes that prevailed in the late 1970s and early ’80s.
Williams noted that there are “increasing disruptions” to supply chains, particularly related to energy and related commodities. New York Fed’s own Global Supply Chain Stress Index It turned out that conditions in March were the most tense since the beginning of 2023.
“Higher energy prices are reflected not only in the rising cost of fuel, but also in costs such as higher airfares, groceries, fertilizers and other consumer products,” he said.
Under the current circumstances, Williams said monetary policy is “well positioned to balance the risks to our maximum employment and price stability goals.”
The Federal Open Market Committee, of which Williams is a permanent voting member, decided in March to keep rates on hold, targeting its benchmark rate between 3.5%-3.75%. Markets are pricing in a 100% chance that the Committee will hold again at the April 28-29 meeting, and virtually no cuts are expected this year.
Williams did not commit to a future policy stance. Although he said the outlook is “highly uncertain,” he still sees real GDP growing at a 2%-2.5% clip this year, with inflation hovering around 2.75%-3% before eventually moving back to the Fed’s 2% target in 2027. Williams said long-term inflation expectations remain largely in check.
