10.07.202612:00 Forex Analysis & Reviews: New York Fed President John Williams sets new inflation benchmarks

Yesterday, the Federal Reserve got a concrete benchmark against which inflation's trajectory in the second half of the year can now be judged.

New York Fed President John Williams said that if the Fed's preferred measure of core inflation, the core PCE price index, rises at a rate of 0.2% per month in the second half of 2026, that would imply movement toward the Fed's 2% year?over?year goal. He said such a pace would be consistent with a continued disinflationary process. It is rare for a Fed official to give the market such a clear and measurable benchmark, and traders will almost certainly use this figure when assessing each future report.

The very fact that this benchmark has been articulated is no accident and reflects a growing hawkish tilt within the regulator. The Fed has held interest rates unchanged in the last 12 months, but more and more Fed officials now advocate for a rate hike. In the June economic projections, nine FOMC members penciled in at least one 25?basis?point increase this year, and the minutes of that meeting — released on Wednesday — showed that several participants already saw grounds for action. The minutes recorded that policymakers discussed how to respond to different inflation scenarios, and Williams described this as a demonstration of the Fed's collective response function — the framework in which the central bank assesses the economy and crafts its response to specific conditions.

What is more surprising is that John Williams pinpointed the main source of his inflation concern: artificial intelligence. He said that, of all the inflationary factors in the US, he is most focused on AI?driven demand. "If this creates a persistent demand impulse relative to supply that leads to inflation, I think you shouldn't ignore that factor," he said at a New York Fed event. That marks a notable shift in rhetoric.

Williams' logic for the Fed's next steps remains conditional and wholly data?dependent. If inflation proves more persistent and significantly exceeds his baseline, monetary policy will have to respond. If conditions are more favorable, policy, he said, is well positioned and can remain so.

For markets, the official's comments add a new, independent layer of complexity to the familiar hawkish arguments such as tariffs and an energy shock. Structural AI?driven demand will not disappear with de?escalation in the Middle Eastern conflict or stabilization in oil prices, which means the Fed could have reason to stay cautious even in a benign geopolitical scenario.

Technical outlook for EUR/USD

Buyers now need to focus on taking the 1.1460 level. Only that would allow targeting a test of 1.1480. From there, a move to 1.1505 is possible, but doing so without support from large players will be difficult. On the downside, I expect meaningful buying only around 1.1430. If there is no demand there, it would be better to wait for a refresh of the low at 1.1410 or to open long positions from 1.1390.

Technical outlook for GBP/USD

For pound buyers, the near resistance to take is 1.3445. Only a break above that would allow targeting 1.3480, above which pushing higher will be rather difficult. The farther target is the 1.3510 area. On the downside, bears will try to take control of 1.3405. If they succeed, a break of that range would deal a serious blow to bulls and push GBP/USD down to about 1.3380, with the prospect of extending to 1.3355.