12:56 PM EDT, 09/04/2025 (MT Newswires) -- With monetary policy "modestly restrictive," it would be appropriate for the Federal Open Market Committee to reduce the target for the federal funds rate gradually, New York Federal Reserve President John Williams said Thursday at the Economic Club of New York.

"The Federal Reserve's monetary policy stance has been modestly restrictive, as seen through the slowing of inflation and wage growth and the gradual cooling of the labor market," Williams said. "This policy stance is appropriate given that inflation has remained above our 2% target, while the labor market has been generally consistent with maximum employment."

While Williams did not provide a specific timeline for rate reductions, he endorsed moving in that direction.

"If progress on our dual mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time," Williams said. "This expectation reflects a delicate balancing of risks to our mandate goals."

Williams cautioned that rates must remain high enough to prevent any tariff-related inflation gains from becoming entrenched but warned against keeping them elevated to the point that hurts the labor market.

"The outlook remains uncertain, and the data can shift in unexpected ways," Williams said. "In navigating these uncertain waters, I remain laser-focused on supporting maximum employment and returning inflation to our 2% longer-run goal on a sustained basis.".