Federal Reserve Bank of New York President John Williams said he expects inflation to continue falling in the second half of this year, adding that elevated borrowing costs are restraining the economy.

He forecast that inflation, as measured by the Fed’s favorite personal consumption expenditure price index, will soften to about a 2.5% rate by the end of this year, and move closer to 2% next year. Inflation was running at a 2.7% clip in the latest reading for March. The government will release April’s PCE index on Friday. Continue reading

Williams stated that the economy's behavior over the past year provides ample evidence that monetary policy is restrictive in a way that helps achieve their goals. He made these remarks in the text of a speech prepared for delivery before a gathering of the Economic Club of New York.

With markets on edge over the direction of monetary policy, Williams offered no clear indication of where he is leaning with possible interest rate cuts.