"While the economy has come a long way toward achieving better balance and reaching our 2% inflation goal, we are not there yet," Williams said, adding, "I am committed to fully restoring price stability in the context of a strong economy and labor market."

Williams' comments came from the text of a speech prepared for delivery before a gathering of the Long Island Association, held in Garden City, N.Y. He did not offer any firm guidance on what's next for the central bank's monetary policy stance, explaining that, "as we navigate the remainder of this journey, I will be focused on the data, the economic outlook, and the risks, in evaluating the appropriate path for monetary policy that best achieves our goals."

Williams said in an interview last week that it's possible the central bank could cut its short-term interest rate target later this year.

At the Fed's December policy meeting, officials penciled in three rate cuts in what is currently a federal funds target rate of between 5.25% and 5.5%. Recent inflation data has caused financial markets to push back the timing of the Fed's first rate cut.

Williams said in his speech that inflation has "declined significantly" over the past year and a half amid "broad based" retreats in the components that make up inflation measurements.

But he added, "we still have a ways to go on the journey to sustained 2% inflation." Williams said he sees inflation ebbing to between 2% to 2.25% this year and to 2% next year. Overall inflation pressures measured by the personal consumption expenditures price index were up by 2.6% in December from the same month a year earlier.

Noting the unexpected strength of recent consumer level inflation data, Williams noted there are likely to be "bumps along the way" back to 2%.

Williams also said he expects growth to slow this year to around 1.5% and for the current 3.7% unemployment rate to rise to around 4%. He said that while risks to the outlook remain the economy has nevertheless become more balanced.

(Reporting by Michael S. Derby; Editing by Chizu Nomiyama)

By Michael S. Derby