Federal Reserve Bank of New York President John Williams downplayed the effect of tariffs on the risk of inflation, adding that price rises are less of a headache for policymakers than before.

Central bankers have seen a “re-balancing of the risks, from one where inflation was the big risk to one where employment and inflation — the risks to them — have moved closer together,” Williams said Monday, per Bloomberg. “It made sense to move interest rates down a little bit to take a little bit of the restrictiveness out of there.”

The Federal Reserve cut interest rates for the first time in 2025 earlier in September, as policymakers tried to steady a slowing job market while facing intense political pressure to lower rates from President Donald Trump. The decision brought the federal funds rate down to a range of 4%-4.25%.

Williams didn’t indicate whether he would support another rate cut at the Fed’s October meeting. He said tariffs have only had a “relatively modest or moderate” effect on inflation, pushing up some prices on imports.

“The tariff effects have been smaller than most people thought, and there doesn’t seem to be any signs of inflationary pressures building,” he added.

His comments struck a different tone to those of Cleveland Federal Reserve President Beth Hammack earlier in the day, underlining the split in opinion among central bankers about the best path forward for policy. Hammack said it's a “challenging time” for central bankers as they try to balance fighting inflation with protecting jobs.

“On the inflation side right now, I continue to be worried about where we are from an inflation perspective,” Hammack said in a Monday interview on CNBC, adding that she doesn’t expect prices to retreat to the Fed’s target of 2% inflation until the end of 2027 or early 2028. However, she added that that the labor market looks “reasonably healthy.”

While the number of Americans filing new applications for unemployment benefits tumbled again last week, fears remain over the state of the jobs market. Rising layoffs have been cited by officials as a potential problem area, and Fed Chair Jerome Powell warned that companies are not hiring is “a way of passing on tariff costs.”

Nonetheless, the better-than-expected data prompted investors to pare back expectations for more rate cuts. September’s nonfarm payrolls report is set for Friday, but risks being delayed by an impending federal government shutdown this week.