NY Fed President and influential FOMC member John Williams said on Monday that inflation remains the number one issue given that it is running far too high and persistently so, reported Reuters. The Fed's goal is to get the economy back into balance, he continued, adding that it's a challenging task, but that the Fed is committed to doing it. 

Williams added that events in China and the war in Ukraine are major drivers of recent market volatility but noted that the Fed is not seeing signs of dysfunction in the US treasury market. Indeed, plans to reduce the size of the balance sheet are having an impact on longer-term interest rates, he added, noting that we have already seen a tightening of financial conditions akin to that seen in 1994. 

Nonetheless, we need to get real interest rates back to zero, he added, before noting he expects inflation to come down quite a bit next year. Williams' remarks come ahead of commentary from Fed Chair Jerome Powell on Tuesday, which will also be closely scrutinised.