(Reuters) – While the Omicron COVID-19 strain may slow down growth in the months ahead and cause supply chain issues, the U.S. economic recovery should continue after this wave has passed, John Williams of New York Federal Reserve Bank stated Friday.

As consumers abandon their in-person activities, some businesses could see a decline in business.

Williams indicated that they are struggling to find skilled workers. He said that the U.S. may still grow 3.5% in this year’s economic disruptions, so they may not cause major problems.

Williams made these remarks in preparation for the Council on Foreign Relations’ virtual event.

According to the Fed official, he believes the labor market will continue to heal as the economy expands. He predicts that unemployment will fall to 3.5% in the coming year.

Williams explained that inflation reached “considerably high levels” due to supply disruptions and strong goods demand.

He said that pricing pressures will likely ease as the growth slows down and supply restrictions are solved. Inflation is predicted to be around 2.5% next year, and close at 2% in 2023.

In two weeks, Fed officials will discuss strategies to increase interest rates or reduce more than $8 billion in bond holdings. Fed Governor Lael Brainard and other Fed officials have been a constant drumbeat this week, indicating that they may increase rates once the bond buying program ends in March.

Williams stated that “gradually” increasing interest rates was the next step to removing accommodations. However, Williams did not address the timing and pace of possible rate increases. He said economic data would guide those decisions.