New York Federal Reserve President John Williams said on Friday it remains possible the US central bank raises interest rates more than it currently expects next year, adding that he’s not expecting the economy to fall into recession as Fed policymakers press forward with action to tame unacceptably high inflation.

“We’re going to have to do what’s necessary” to get inflation back to the Fed’s 2% target, Williams said in an interview on Bloomberg’s television channel. He said monetary policy will need to become restrictive and the peak federal funds rate next year, which Fed policymakers projected this week at 5.1%, “could be higher than what we’ve written down.”

Williams, who is also vice chair of the rate-setting Federal Open Market Committee, noted that “inflation has been stubbornly high … and we’ve seen the economy remain very resilient to higher interest rates.”

But when it comes to some Wall Street forecasts that argue the Fed may need to go as high as 6% or 7% on the federal funds rate target, Williams said “that’s definitely not my baseline.”

Williams was the first Fed official to weigh in after the central bank on Wednesday raised its benchmark overnight interest rate by half a percentage point to the 4.25%-4.50% range, as expected. The Fed also upgraded its estimate of how far it will need to raise rates to lower inflation and predicted weaker economic growth and higher unemployment.

In his news conference after the end of the Dec. 13-14 policy meeting, Fed Chair Jerome Powell acknowledged that the actions he believes the central bank will need to take will create challenges for the economy, saying “I wish there were a completely painless way to restore price stability. There isn’t, and this is the best we can do.”

Williams said he doesn’t see a downturn in the economy as inevitable, noting that in terms of the Fed’s current outlook, “I don’t see this as a recession. We’re clearly not in a recession right now.”

The minutes from the Fed’s November policy meeting showed that central bank staff economists viewed the risks of recession against continued growth as roughly even. Meanwhile, on Thursday, the New York Fed said its internal economic model sees a 0.3% decline in overall activity next year and flat growth in 2024, with a return to growth the year after.

‘Absolutely committed’

The New York Fed chief also said recent inflation data has been more positive amid improving supply chains and other factors, but he said high service-sector inflation remains an issue and a target of Fed action. He added that wage gains are high but not something akin to a 1970s-style force driving up overall price pressures.

The Fed has faced criticism for being too slow to start raising rates to lower inflation, which has been running at 40-year highs, but Williams said that he doesn’t believe the central bank has lost credibility with markets and the public.

“We’re absolutely committed to get inflation back to our 2% goal, and we’re acting in that way,” Williams said, adding “I don’t think we’ve lost the credibility” of being seen as resolute inflation fighters.

Williams also said that in terms of any possible disconnect between the market and Fed views of the economic future, “I think pretty much everyone understands that real interest rates need to get restrictive and stay there.”