NEW YORK (Reuters) -Federal Reserve Bank of New York President John Williams said Wednesday that monetary policy is in the right place to allow central bankers to monitor the economy before taking their next steps, while warning that the impact of trade tariffs is only just starting to hit the economy.

"Maintaining this modestly restrictive stance of monetary policy is entirely appropriate to achieve our maximum employment and price stability goals," Williams said in a speech given before a gathering of the New York Association for Business Economics. Holding at current levels "allows for time to closely analyze incoming data, assess the evolving outlook, and evaluate the balance of risks to achieving our dual mandate goals."

Williams said that the current state of the economy is good and labor markets are solid, although he expects both of those to moderate as the year advances. The bank president pointed to ongoing uncertainty and warned against complacency over the impact of President Donald Trump's import tax surge.

"It's important to note that it's still early days for the effects of tariffs, which take time to come into full force," Williams said. "Although we are only seeing relatively modest effects of tariffs in the hard aggregate data so far, I expect those effects to increase in coming months."

"I expect tariffs to boost inflation by about 1 percentage point over the second half of this year and the first part of next year," he added.

Williams said that he expects the economy to slow to around a 1% growth rate this year, and for the unemployment rate, now at 4.1%, to rise to 4.5% by year's end.

On the inflation front, Williams said he sees inflation coming in between 3% and 3.5% this year, before ebbing back to "about" 2.5% next year. Williams sees inflation at the 2% target in 2027. He also said that he expects inflation in June to stand at 2.5% and core prices at 2.75%.

Williams weighed in on what had proved to be a tumultuous day for the central bank, as markets were buffeted by reports that Trump was moving closer to firing Fed Chairman Jerome Powell, a notion which the president later knocked down.

"I can't comment" on what the president said and how markets reacted, Williams told reporters after his speech. Responding to a question about what he would do as vice-chairman of the rate setting Federal Open Market Committee if Powell were removed, Williams said independent central banks deliver better results and noted that in his experience Fed officials and staff maintain a "laser-like" focus on the central bank's overall mission and its work to keep inflation contained and the job market strong. 

Trump has repeatedly blasted the Fed for not cutting rates, arguing the central bank needs to move the cost of short-term credit down to crisis levels. Meanwhile, most Fed officials say they are in a wait-and-see mode regarding rate cuts, as they look to see how the president's tariffs will affect inflation, which even now is at levels that stand above the Fed's 2% target level.

At the Fed's June policy meeting, officials penciled in two rate cuts for later this year and markets believe the easings could start at the September FOMC meeting. That said, a small minority of Fed officials have suggested an openness to cutting rates at the July 29-30 meeting, believing that any tariff-driven inflation will be a one-off that officials can ignore.

Williams also told reporters that amid a drop in the dollar its status as the preeminent reserve currency remains unchanged. "There are a lot of fundamental factors that support the role of the dollar ... in global trade and in global financial markets, and that I see is unchanged now."