It will be appropriate for the Federal Reserve to start raising interest rates in March in response to high inflation and strong jobs growth, New York Fed Bank President John Williams said Friday.

"With today’s strong economy and inflation that is well above our 2% longer-run goal, it is time to start the process of steadily moving the target range back to more normal levels," Williams said in remarks prepared for a virtual event organized by New Jersey City University and the Guarini Institute for International Education and Economic Mobility. "In particular, I expect it will be appropriate to raise the target range at our upcoming meeting in March."

After interest rate increases are underway, the next step would be for the Fed to begin reducing its holdings of Treasury securities and mortgage-backed securities, Williams said. He expects that process to start later this year.

Williams said he expects real U.S. GDP to grow by slightly less than 3% this year and for the unemployment rate to drop to about 3.5% by the end of the year. He projects personal consumption expenditures (PCE) price inflation to decline to about 3% and for it to fall further next year as supply challenges improve.