Federal Reserve Bank of New York President John Williams said he is monitoring how strains in the banking sector effect the US economy and left the door open to leaving interest rates on hold next month.

“I will be particularly focused on assessing the evolution of credit conditions and their effects on the outlook for growth, employment, and inflation,” Williams said Tuesday at an event with the Economic Club of New York. “We’re going to get a lot of data between now and our June meeting.”

Fed officials lifted interest rates by a quarter point last week, bringing the target on their benchmark rate above 5% for the first time since 2007. They next meeting June 13-14.

Fed Chair Jerome Powell hinted it could be the last rate increase for the time being, but left the door open for the US central bank to do more should the inflation rate remain higher than officials expect.

Asked repeatedly if the Fed would pause next month, Williams declined to be drawn out but acknowledged that policymakers were no longer providing explicit forward guidance on rates.

“What we’re signaling is we’re going to make sure that we achieve our goals and going to assess what’s happening in the economy and make the decision based on that data,” he said. “And if additional policy firming is appropriate, then we’ll do that.”

He was more plainspoken on the question of rate cuts this year, which investors bet the central bank will deliver according to pricing in futures contracts.

No 2023 Cuts

“I do not see in my baseline forecast any reason to cut interest rates this year,” he said, adding that the economy began the year on a solid footing and he saw two-sided risks to the outlook. “In my forecast we need to keep restrictive stance of policy in place for quite some time.”

Policymakers are trying to assess how the most aggressive Fed tightening campaign since the 1980s is working its way throughout the economy. Recent strains in the banking system following the collapse of four regional lenders is also contributing to tighter credit conditions and could limit how much higher rates will need to go to bring inflation back down to the Fed’s 2% target.

Williams said it was hard to judge how much of additional headwind these strains pose to the economy, but they will have some impact.

“There’s clearly a piece of this which is more than just tightening monetary policy and is maybe a reflection of caution or pulling back by some institutions,” he told reporters after the event. Williams also noted that the extent this ultimately crimps credit could be offset if other lenders stepped up in their place.

The New York Fed chief also expects GDP to “grow modestly this year,” and then pick up “somewhat” in 2024. He expects the unemployment rate to rise to a range of 4% to 4.5% over the next year and the inflation rate to drop to about 3.25% this year and to reach the Fed’s 2% goal over the next two years.

A Fed survey released Monday showed that banks reported tighter standards and weaker demand for loans in the first quarter, extending a trend that began before the latest stresses in the banking sector emerged.

(Updates with Williams remarks to reporters in 11th paragraph.)