By Lindsay (NYSE:) Dunsmuir

(Reuters) – The U.S. central banking may have to increase interest rates aggressively in order to combat high inflation. John Williams, President of the New York Federal Reserve, said Friday. He is the latest policymaker who opened the doors to a larger rate hike for May.

Asked if he would support a half-percentage-point rise in the Fed’s benchmark overnight interest rate at a May 3-4 policy meeting, Williams said the central bank will be guided by economic data between now and then.

Williams spoke at a joint conference of the Central Reserve Bank of Peru (Board for International Settlements) and said that “what the right decision at any movement will depend upon the situation at the time.”

He said, “If necessary to do 25 we should do it.”

One of the things the New York Fed Chief will focus on is whether or not there are any improvements in the supply chain and labor supply problems as the COVID-19 pandemic subsides.

Williams explained that “we have many questions that we aren’t yet sure of the answers to… so we need to be agile and change as we go.”

Jerome Powell (Fed Chair) and several other U.S. central banking officials expressed an urgency earlier in the week to fight rising inflation, which has reached a record 40-years high. This was despite uncertain economic consequences from the conflict in Ukraine.

Williams noted, too that stable and low inflation are crucial for the Fed to achieve its maximum employment goals and financial stability goals. Based on Fed’s preferred measure of inflation, it is at 6%. This is more than three-times its flexible average goal.

This talk led to the assumption that the Fed would raise its policy rates by half a point at its May meeting and may reduce its $9 trillion-plus balance sheet.

The futures for interest rate rates are now pricing in a year end policy rate of 2.5%-2.5%. However, they also have a good chance that the rate will be higher at 2.5%-2.5%. For this to happen, the Fed must raise rates half-a-point at each of the Fed’s six meetings. It would also need to do so at the three other meetings.

Current forecasts by the Fed would see the Fed raise its overnight benchmark interest rate to nearly 2% in this year and then rise to near 3% next. This would help to slow down the economy as well as further reduce price pressures.