New York Federal Reserve Chairman John Williams said on Tuesday that inflation “remains too high” on the back of a strong job market.

Speaking to the Economic Club of New York, Williams noted some signs of moderation in rents, which have been a major driver of inflation over the past year. Rents for new rentals showed slower rates of increase in March.

But inflation in so-called core services other than housing is still stubborn, he said. That, he said, may in part be related to a still-strong job market.

“Although we are seeing some signs of a gradual cooling in demand for labor — as well as some goods and commodities — aggregate demand continues to exceed supply,” he said.

Although job vacancies have fallen from a peak since last March, job growth remains strong, he said. An average of around 220,000 new jobs were created in the past three months and the unemployment rate is at a historically low level of 3.4%.

He also pointed to the vacancy-to-unemployment ratio, which is well above pre-pandemic levels.

The Fed last week voted to raise the target range for its benchmark interest rate by 0.25%, while keeping options open for future rate hikes, as part of its aggressive effort to bring down inflation.

The central bank’s move has pushed its benchmark interest rate, the fed funds rate, to a new range of 5% to 5.25%, the highest since September 2007.

The Fed said future rate hikes would depend on the impact of previous rate hikes on the economy and financial developments.

Williams said on Tuesday he would have a “particular focus” on assessing developments in credit conditions and the impact of those conditions on the outlook for growth, jobs and inflation.

Federal Reserve Bank of Chicago President Austin Goolsbee warned Monday that a credit crunch was underway and a recession was possible.

“The credit crunch, or at least the credit crunch, is starting,” Goolsbee told Yahoo! Finance LIVE in an exclusive interview when asked how he felt about credit conditions given several bank failures over the past two months.

He says the Fed needs to take recent bank stress and credit conditions into account when setting monetary policy, although it’s too early to say before the next meeting whether to pause.

A new Fed survey of loan officers released Monday showed that banks tightened lending standards for businesses and households in the first quarter and are expected to tighten further for the remainder of 2023.

The Fed highlighted a broader credit contraction as a near-term risk to the financial system in a separate report released on Monday.

“A sharp fall in the availability of credit would push up the cost of financing for firms and households and potentially lead to a slowdown in economic activity,” says its semi-annual Financial Stability Report.

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