Fed's Williams (Voter, Neutral) says bond market driven by strong US economy and big investments in AI

• Yields not driven by inflation outlook or financial conditions.
• Hard to know if there is an inflation component within bond yield movement.
• There is correlation between bond yields and middle east conflict.
• Some of this is probably contained in the risk premium.
• Fed looks at totality of data when setting policy.
• It is our job to act on policy, no one else can do that for us. Was asked about whether market moves can help the Fed do its job.
• Yields are affecting cost of investment but demand for investment is high.

A Fed official attributing the backup in yields to growth and investment rather than inflation or tightening financial conditions is a familiar framing exercise, and the framing is the signal: officials who read term premium as benign historically resist treating higher yields as a substitute for policy, whereas the alternative reading has on past occasions been used to argue the market has done some of the Fed's work. Williams explicitly rejects that substitution here, which leans against the camp that has at times cited tightening conditions as a reason to hold back. The concession that an inflation component is hard to rule out, and that geopolitical risk premium sits inside yields, leaves the door open to revising the interpretation as data arrive, a pattern seen in prior episodes where officials' decomposition of yield moves shifted with subsequent prints. As a permanent voter with a centrist reputation, his read carries more weight as a proxy for the committee's centre of gravity than commentary from the wings. The follow-ons are whether other officials adopt the same growth-led framing and how the next inflation releases are characterised against it. As remarks rather than a decision, the signal is about reaction function, not timing.