Moving Fed policy rate to 5.00%-5.25% this year seems reasonable, Williams says

NEW YORK (Reuters) – New York Federal Reserve President John Williams said on Wednesday the U.S. central bank still has more interest rate rises ahead of it and will need to keep monetary policy restrictive for some time to come.

Moving to a federal funds rate of between 5.00% and 5.25% “seems a very reasonable view of what well need to do this year in order to get the supply and demand imbalances down,” Williams said at a Wall Street Journal event.

Williams‘ comments were his first since the Fed’s decision last week to moderate the pace of its rate rise campaign. Last Wednesday, the rate-setting Federal Open Market Committee boosted its overnight target rate by a quarter of a percentage point to the 4.50%-4.75% range as it continued its effort to lower high levels of inflation.

The Feds rate hike was followed just days later by surprisingly strong jobs data that suggested the central bank may have to raise rates even more as it seeks to better balance strong demand with available supply in the economy.

Speaking on Tuesday, Fed Chair Jerome Powell said “if we continue to get, for example, strong labor market reports or higher, higher inflation reports, it may well be the case we have to do more” with rate rises over time.

On Wednesday, Williams said it is key for monetary policy to get to and stay at levels that will restrain growth for a few years. He added that his expectations of future Fed rate cuts are driven mostly by a need to respond to the likelihood of lower levels of inflation in the future.

Williams said the prospect of a lower federal funds rate next year is driven mostly by monetary policy adjusting to a weaker inflation environment.