Federal Reserve (Fed) Bank of New York president John Williams said that while inflation had cooled recently towards the Fed’s 2% target, policymakers are still some distance from their goal.

“Inflation is now around 2-1/2%, so we have seen significant progress in bringing it down. But we still have a way to go to reach our 2% target on a sustained basis,” Williams said on Friday in prepared remarks for an event at the Reserve Bank of India in Mumbai. “We are committed to getting the job done.”

Earlier this week, the New York Fed chief said he is “confident” the US central bank is on a path to achieving its 2% inflation target.

A report released last week showed the Fed’s preferred measure of inflation decelerated in May, boosting the case for the US central bank to begin easing later this year. The so-called core personal consumption expenditures price index, which strips out food and energy, increased just 0.1% from the prior month. That marked the smallest advance in six months.

Fed officials left interest rates unchanged at a more than two-decade high in last month’s policy meeting, and signalled that they see fewer rate cuts this year from what was expected in March. Policymakers will meet next on July 30 and 31.

In the speech - which focused on the uncertainty of monetary policy amid global shifts in climate, technology and supply chains - Williams highlighted the importance of “well-anchored” inflation expectations. He also pointed to the “perennial challenges of measuring the so-called star variables such as the r-star”.

The resilience of the US economy has prompted discussions about the so-called long-run neutral interest rate or r-star, a level of rates that neither stimulates nor restrains activity. 

Williams has pushed back against recent commentary that the neutral rate has risen since the Covid-19 pandemic. In remarks on Wednesday, he cited estimates that place that rate in the US and eurozone near to where it was before the outbreak of Covid.

Officials in June lifted their estimates of where rates will settle in the longer term to 2.8%, from 2.6% in the March gathering, according to the median projection. The increase followed a slight bump in March.

  - Bloomberg