New York Federal Reserve President John Williams said Tuesday that inflation "remains too high” due to a strong job market.

In a speech before the Economic Club of New York, Williams noted some signs of moderation in rents, a significant driver of inflation over the past year. Rents on new leases showed slower rates of increases in March.

But inflation on so-called core services excluding housing is still sticky, he said. That, he said, can be partly tied to a still-strong job market.

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

Although openings have come down from a peak since last March, job growth remains strong, he said. Monthly job gains have averaged about 220,000 over the past three months and the unemployment rate is at a historically low level of 3.4%.

He also pointed to the ratio of job openings to unemployed, which far exceeds levels prevailing before the pandemic.

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

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

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

Williams said Tuesday he will be “particularly focused” on assessing the evolution of credit conditions and the effects of those conditions on the outlook for growth, employment, and inflation.

Federal Reserve Bank of Chicago President Austan Goolsbee warned Monday that a credit tightening is under way and recession is a possibility.

“The credit crunch or at least the credit squeeze is beginning,” Goolsbee told Yahoo! Finance LIVE in an exclusive interview, when asked how he views credit conditions in light of several bank failures over the last two months.

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

A new Fed survey of loan officers released Monday showed that banks tightened lending standards for businesses and households during the first quarter and they expect to keep tightening for the rest of 2023.

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

"A sharp contraction in the availability of credit would drive up the cost of funding for businesses and households, potentially resulting in a slowdown in economic activity," it said in its semi-annual Financial Stability Report.

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