New York Fed President: "Surge in U.S. Treasury Yields Not Due to Market Instability"

"U.S. Growth Expectations Reflected in Treasury Yields"
Cautious Stance on Additional Rate Hikes

John Williams, President of the Federal Reserve Bank of New York, assessed that the recent sharp rise in U.S. Treasury yields is not due to market dysfunction or financial instability, but rather reflects the strength of the U.S. economy and solid growth prospects. However, he withheld judgment on whether an additional rate hike is necessary at this month's Federal Open Market Committee (FOMC) meeting.

 

John Williams, President of the Federal Reserve Bank of New York. New York (USA) – Special Correspondent Yoonju Hwang

On September 2 (local time), in an interview with CNBC's "Squawk Box" held at the New York Fed headquarters, President Williams said regarding the recent rise in Treasury yields, "What is really driving this to a large extent is the strong U.S. economy and robust economic outlook," adding, "Large-scale investments in artificial intelligence (AI), data centers, and the overall technology sector are supporting this."

He explained, "It is not that financial conditions are impacting the economy, but rather the economy is impacting financial conditions." This means that he views the recent increase in long-term Treasury yields not as a sign of market dysfunction or financial instability, but as a result of rising growth expectations in the U.S. and increased investment being reflected in the market.

On the need for further rate hikes, he expressed a cautious stance. President Williams said, "We need to wait and see," continuing, "There is currently no clear signal as to whether current monetary policy will be enough to return inflation to the target level over the next one to two years, or whether additional measures will be required."

Regarding recent inflation indicators, he gave a positive assessment. President Williams said, "Recent inflation indicators have been moving in an encouraging direction," but emphasized, "We cannot just look at one or two months' worth of data. We need to consider all the information we have and the overall picture."

President Williams also evaluated that long-term inflation expectations remain stable, even though inflation has risen this year due to factors such as tariffs and the war involving Iran. He said inflation expectations remain "well-anchored."

In the market, expectations of an additional Fed rate hike have quickly increased ahead of the upcoming FOMC meeting on September 15-16. According to CME Group's FedWatch, as of this morning the market-implied probability of a rate hike in September stood at around 66%.

Meanwhile, as President of the New York Fed, Williams has a permanent voting seat at the FOMC, which makes decisions on the Fed’s monetary policy.

This content was produced with the assistance of AI translation services.