The recent increase in long-term U.S. Treasury yields reflects the strength of the economy rather than inflation pressures, Federal Reserve Bank of New York President John Williams said on Wednesday.
Speaking to CNBC, Williams attributed the rise in the 10-year Treasury yield to robust investment in artificial intelligence, data centers and broader technology sectors. The benchmark yield stood at 4.801% on Sept. 1, up 0.043 percentage point, or 0.9%, from the prior session.
The Fed official also noted a link between bond yields and geopolitical risks, highlighting that tariffs and the conflict in the Middle East are the primary factors keeping inflation above the central bank’s 2% target. Despite these pressures, Williams said inflation expectations remain well anchored and that recent data trends point toward easing price pressures.
Williams described the labor market as stable and solid, reiterating that achieving the 2% inflation objective remains the Fed’s primary focus. He added that monetary policy is functioning as intended and that Treasury debt management has not complicated the central bank’s operations.
The New York Fed president expressed optimism about the long-term economic impact of artificial intelligence, noting that sustained investment demand is pushing bond yields higher. He also supported the outcome of the July Federal Open Market Committee meeting and indicated that additional data would guide the next policy decision.
Williams’ remarks follow a period in which AI-linked equities such as Super Micro Computer and AppLovin have surged, with the ProPicks AI / Tech Titans strategy outperforming the S&P 500 by more than twofold over the past 18 months.
