John Williams
John Williams, the chair of New York's Federal Reserve, said climbing treasury yields is a result of a strong economy, not market dysfunction.

John Williams, chair of the New York Federal Reserve, said rising Treasury yields reflect a strong economy rather than dysfunction in financial markets.

Speaking to CNBC, Williams said the situation was driven "in large part" by "really a strong U.S. economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general."

"So, I think it's not really about financial conditions affecting the economy. It's more about the economy affecting financial conditions," he added.

Government bonds continued to sell off on Wednesday, with the 10-year Treasury yield remaining above 4.8%—a level not seen since early 2025.

Williams also addressed the inflation outlook, saying there were "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 [inflation] data recently have been encouraging towards that, but again we can't just look a month or two. We've got to get a full picture and look at all the different pieces of information we have," Williams added.

The previous day, Fed Governor Michael Barr said he would support an interest-rate increase if inflation failed to ease.

Speaking at a banking forum in Washington, Barr, who votes on Federal Open Market Committee decisions, said he was concerned about "broader price pressures taking hold."

"If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."

Fed Chair Kevin Warsh also appeared to signal that he was prepared to support a more hawkish policy if prices remained above the central bank's target.

Speaking at the Jackson Hole symposium last week, Warsh said that although recent inflation readings had been "better than expected," they did not show that "underlying trends have meaningfully improved." He said that if the trend did not move lower in the future, the central bank would have "work to do."

However, he offered no guidance on the central bank's next steps, arguing against "oversharing" policy deliberations.

Originally published on IBTimes