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

Yields 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. Yields are affecting cost of funding but demand for investment is high. Most of yield moves come from investment surge. Treasury buybacks do not complicate his job of conducting monetary policy. Policy 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. Supported previous decision to hold rates. Inflation/Labour Middle East conflict and tariffs are the biggest drivers of inflation. There's also some effects of higher services inflation as well. Not seeing second round effects. Inflation expectations are well anchored. Sees trend of inflation moving down, Fed needs to be data dependent. Labour market is stable and solid. Will be asking himself if inflation data is signalling the Fed is moving in the right direction. Will need to get to 2% inflation in forseeable future. No clear case to see whether they are bringing inflation back to target, recent trends have been encouraging, but we look at all the data. Neutral rate Asked about impact of surge on investment on the neutral rate, says investment will drive higher productivity growth, which traditionally results in higher rates and higher neutral rates. However, current real interest rate is around 1% which has moved up a little bit. Data is not screaming the neutral rate has risen. Would expect neutral rate to rise in this scenario, but data now showing that yet. Asked if rates are in a good place, says they are in a good place to balance Fed dual mandate. Balance sheet Looking forward to task force balance sheet review. Looking forward to that discussion at the FOMC.