Investing.com -- Federal Reserve Bank of New York President John Williams said today he does not expect a sustained rise in energy prices for the rest of the year, despite renewed conflict in the Middle East.

Williams told a conference at his bank that market expectations for oil prices to decline over the next six to 12 months remain reasonable. He said the fundamentals suggest energy prices are likely around their peak and should come down over time.

The Fed official said inflation remains "far too high" and that monetary policy is focused on how energy prices impact inflation. Williams added that artificial intelligence investment is currently driving inflation, though he expects AI to become a positive supply shock in the longer term. His base case sees broader AI use boosting productivity.

Williams said the Fed is actively debating scenarios around inflation and remains committed to bringing inflation back to 2%. He stressed the importance of looking at underlying inflation factors rather than just specific measures, noting that government technical changes could better reconcile differences between PCE inflation and CPI.

The New York Fed president said monetary policy needs to remain data dependent. He described the labor market as very stable. Williams noted that uncertainty remains about the longer-term neutral rate and that the Fed minutes captured a "collective reaction function."