(Bloomberg) — Federal Reserve Bank of New York President John Williams said he sees room for the US central bank to cut interest rates again in the near term as the labor market softens.

In the text of a speech he delivered Friday in Santiago, Chile, Williams said downside risks to employment have increased while upside risks to inflation have eased.

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“I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions,” he said. “Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.”

The remarks by Williams suggests another rate cut remains a possibility as Chair Jerome Powell tries to forge a consensus among a fractured group of policymakers in time for their Dec. 9-10 gathering in Washington.

Following a second consecutive rate cut in October, a number of officials voiced their opposition to, or uncertainty over, supporting a third straight move in December.

Investors lifted their bets on the likelihood of a rate cut at the December meeting, and now see about a 60% probability of a reduction, according to pricing in futures contracts, up from around 45% before Williams’ speech.

“My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat,” Williams said in his speech. “Underlying inflation continues to trend downward, absent any evidence of second-round effects emanating from tariffs.”

Williams said that trade tariffs have likely contributed about one half to three quarters of a percentage point to the current inflation rate, though he added that he doesn’t see tariffs fuelling any second-round or other spillover effects on prices.

The consumer price index rose 3% in the year through September, contributing to worries among some officials.

While Williams said the central bank must return inflation to its 2% target, they need to do so without inflicting deeper pain on the labor market.

“Looking ahead, it is imperative to restore inflation to our 2% longer-run goal on a sustained basis. It is equally important to do so without creating undue risks to our maximum employment goal,” Williams said.

Williams said tariffs will continue boosting prices through next year, but he expects inflation will get back on track toward 2% in 2027.

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