More from NY Fed Pres. Williams:

• We have a solid US economy
• Characterizes the labor market as doing well
• says that AI will have lasting impact on productivity
• Calls US dynamism as a reason behind the rising productivity
• Some of the US productivity rise predates the rise of AI.
• Hit to inflation likely to peak in the next few months
• near-term inflation around 4% in core inflation around 3%
• monetary policy need to be data dependent
• anchoring inflation expectations is critical.
• Sees elevated near-term inflation expectations, but long-term stable
• supply chain disruptions are a concern and they are happening due to war.
• Fed must be clear it is getting inflation to 2%
• Path for monetary policy depends on data, outlook and risks.
• Monetary policy is right where we wanted to be, is well-positioned
• Where policy goes will be driven by data.

The US has led technology, and that dynamism that Williams speaks about has been able to increase earnings. Now with AI a another leg to the upside could occur that seems to be making things like tariffs and war less impactful on the overall economy.

If productivity can increase and the headwinds from things like tariffs and the war in Iran can be reversed, there is the argument that inflation does come down and perhaps see deflation. The inflation from tariffs and the war give companies an excuse to raise prices in the face of productivity increases and rising costs. If productivity increases and costs move back to the downside do prices ease? Does inflation expectations keep companies wary as workers look for higher pay?

Markets are anxious for comments from new Fed chair Kevin Warsh.