ISTANBUL

The head of the US Federal Reserve Bank of New York said Friday that the American economy is in balance to begin lowering interest rates.

"With the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate," John C. Williams said in his remarks at the Council on Foreign Relations in New York City.

"The significant progress we have seen toward our objectives of price stability and maximum employment means that the risks to the two sides of our dual mandate have moved into equipoise," he added.

Williams said supply and demand imbalances have dissipated, labor market conditions have eased, and inflation has come down significantly in recent months.

He noted that labor market is now roughly in balance and therefore unlikely to be a source of inflationary pressures going forward.

"We’ve come a long way from the unacceptably high inflation and overheated labor market that we experienced two years ago," he said.

"Monetary policy has been unequivocally focused on returning inflation to our 2 percent longer-run target. The risks to our two goals are now in better balance, and policy needs to adjust to reflect that balance," he added.

The Fed's next two-day monetary policy meeting will conclude on Sept. 18 when it is widely expected to make its first rate cut in more than four years.