Federal Reserve Bank of New York President John Williams said Thursday that despite the renewal of war in the Middle East, he was not looking for a sustained rise in energy prices over the remainder of the year. Williams stated that the markets still expect oil prices to come down over the next six to 12 months, which he believes is a reasonable baseline.

Energy Price Outlook

Williams was asked about how the Fed could respond to recent events at the Federal Open Market Committee meeting now scheduled for July 28-29 with a potential rate hike. He mentioned that they haven’t even started the process of doing an analysis and that the Fed meets every six weeks, implying that decisions are not made in perpetuity.

While forecasts released at the gathering indicated officials had penciled in rate increases this year amid persistently above-target inflation, Chairman Kevin Warsh refused to provide guidance about the outlook. Williams had grown more optimistic that overall high levels of inflation will ease due to falling energy prices tied to a seeming resolution of the Middle East war.

However, with the restart of hostilities, the risks of higher energy prices and inflation over the remainder of the year have increased, potentially leading to a rate hike to tamp down price pressures. Williams emphasized that any change in the Fed’s interest rate toolkit should prioritize maintaining the safety and stability of the banking system.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.