New York Fed President John Williams said yesterday in an interview that slowing the pace of rate hikes in December would simply mean “stepping down one step” in the effort to curb inflation.

“I still think we have a ways to go in terms of where the fed funds target is and where we need to get it to next year in order to get the sufficiently restrictive stance,” he said.

“Inflation, first of all, is the number one problem we’re facing in terms of monetary policy. It is far too high,” Williams said. And, bring inflation back to 2% target will “take a good couple of years”.

But he added: “I expect to see a pretty significant decline in inflation next year as supply chain issues improve, as we see the slowing economy, the economy getting into better balance.”

Fed Governor Michelle Bowman said she expect ongoing increase in rates at coming meeting. But, it will be “appropriate” to slow the pace of tightening. That will allow policymakers to full assess the impact of their actions.

Also, “we’re still seeing extremely high levels of core and CPI inflation,” she said. “Until I see our actions actually having some impact that would lower the rate of inflation, I think my expectation would be a slightly higher” terminal rate than projected back in September.

Fed Chair Jerome Powell indicated in a speech that it “makes sense” to start slowing the pace of tightening as soon as in December. But, the level of the terminal rate, and the time to stay there are now more significant than when to start slowing down.

“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt,” Powell said. “Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting,” he added.

But Powell also indicated, “the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restrictive level for some time. History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.”

Full remarks here.