New York Fed President John Williams told Wall the Wall Street Journal on Tuesday that inflation expectations in the US were well anchored but added that it would take a few years to bring inflation back to 2%, as reported by Reuters.

Additional takeaways

"Some positive momentum into the second half of this year."

"Inflation is still way too high."

"We will look across data ahead of the next meeting including inflation, employment data, job openings and others."

"We clearly have an imbalance in the economy."

"We need to slow demand enough to meet supply."

"We will weigh all of this in the next meeting; the decision on the rate hike will depend on the totality of the data."

"Fed has to think about where we want to see interest rates both this and next year."

"If we need to get interest rates significantly higher by the end of the year, of course, that informs decisions at each meeting."

"We need to think about the path of policy; that depends on jobs, inflation data."

"We need to get real interest rates above zero."

"How high rates need to go depends on economic data; my baseline is we need rates somewhat above 3.5%."

"Financial conditions have tightened quite a bit since the beginning of the year."

"That tightening is consistent with the Fed's direction on policy."

"There will be a time when policy actions will change."

Market reaction

The US Dollar Index retreated from session highs following these comments and was last seen trading flat on the day at 108.75.