“If I had to choose one word to describe 2025, it is uncertainty,” Williams, a voting member of the Fed’s interest rate-setting committee, told the New Jersey Bankers Association, citing geopolitical events and trade policy changes.

“What’s striking is that despite all the uncertainty, the US economy has shown considerable resilience and looks poised to pick up steam next year.”

Williams said progress toward the Fed’s two-percent inflation target has “temporarily stalled,” with the most recent reading at about 2.75% – roughly unchanged from a year ago.

He estimated tariffs have contributed around half a percentage point to current inflation, though their effects “have been more muted and drawn out than I originally anticipated.”

The labor market has continued to cool, Williams said, with “anemic” job growth and the unemployment rate moving up steadily in recent months.

However, he emphasised this has been “an ongoing, gradual process, without signs of a sharp rise in layoffs or other indications of rapid deterioration.”

Williams said downside risks to employment have increased while upside risks to inflation have “lessened somewhat.”

He forecast inflation will decline to just under 2.5% next year before reaching the Fed’s two-percent goal in 2027, with tariffs having “a largely one-off price level effect.”

Last week, the US Federal Reserve lowered interest rates for a third consecutive time this year, with Williams voting along with the majority for the cut.