New York Federal Reserve President John Williams hinted at a potential interest rate cut in the coming months, suggesting that the Fed might be closer to this decision than previously thought.

What Happened: Williams, who is also the vice-chair of the Fed's rate-setting committee, indicated that a rate cut could be on the cards if the recent slowdown in inflation persists, reported The Wall Street Journal on Wednesday.

He noted that the current inflation data, combined with signs of a gradual cooling in U.S. labor-market conditions, are "getting us closer to a disinflationary trend that we're looking for." However, he emphasized the need for more data to confirm a sustainable movement towards the Fed's 2% inflation goal.

Williams, a key policy advisor to Fed Chair Jerome Powell, suggested that a rate cut is unlikely at the upcoming Jul. 30-31 meeting, but could be considered at the mid-September meeting if there are no major economic surprises.

He also addressed concerns about the difficulty of bringing inflation back to the 2% target, stating that different inflation measures are "all moving in the right direction and doing that pretty consistently."

Why It Matters: Williams' comments come in the wake of Powell's recent remarks, where he praised the latest inflation progress and hinted at imminent rate cuts. Powell's statements were based on the last three inflation reports, which have boosted the Fed's confidence in inflation moving towards the 2% target.

Meanwhile, the inflation situation has sparked a debate among economists, with some, like Nobel laureate Peter Schiff, criticizing the Fed's handling and advocating a return to the gold standard. Others, like Fed Governor Lisa Cook, have emphasized the central bank's readiness to act if the unemployment rate surges.

President Joe Biden also weighed in on the inflation progress, celebrating the positive developments in a recent White House press release. The latest Consumer Price Index report showed a 3% year-over-year rise in June, dropping from May's rate of 3.3% and falling below economists' expectations.