Investing.com -- Federal Reserve Bank of New York President John Williams said Tuesday that rising long-term bond yields reflect a strong economy rather than inflation concerns, as he continues to gather data ahead of the next monetary policy decision.

Williams told CNBC that increases in borrowing costs are "really a strong U.S. economy and a strong economic outlook fueled by big investments in AI and data centers and technology in general."

The Fed official noted a correlation between bond yields and the Middle East conflict. He said tariffs and the Middle East war are major drivers of inflation remaining above the central bank's target.

Williams stated that inflation expectations remain contained and the Fed is not seeing second-round inflation impacts from tariffs. He described recent inflation data as encouraging and said the trend points toward lower inflation.

The labor market remains stable and solid, Williams said, adding that achieving 2% inflation in the foreseeable future is the Fed's primary objective.

Williams expressed optimism about the long-term economic impact of artificial intelligence. He said strong investment demand is putting upward pressure on yields.

The New York Fed president said he supported the outcome of the July Federal Open Market Committee meeting and needs to collect more data before the next FOMC meeting. He added that monetary policy implementation is working well and Treasury debt management patterns do not complicate matters for the Fed.