SAN DIEGO (Reuters) – New York Federal Reserve Bank President John Williams said on Wednesday that while the U.S. economy looked to be in a “favorable place” when viewed through the rearview mirror, the outlook through the windshield ahead was “mixed.”

Trade uncertainty, geopolitical risks and other factors were creating “crosscurrents” that needed to be navigated as the Fed tries to keep the economy in “roughly” the same place it is currently, Williams said at an economics roundtable at the University of California, San Diego.

The inverted yield curve showed negative investor sentiment about the outlook for U.S. economic growth, he said, a signal he said he “takes seriously.” Still, Williams said the labor market was strong and the U.S. economy was in a positive place compared to the rest of the global economy.

“We’ve got monetary policy in the right place,” he said.

The influential Fed official said he believes U.S. policymakers are close to achieving their goal of “maximum employment.” He added he would like inflation to be “a little bit higher” to make up for several years of inflation falling short of the Fed’s 2% target.

The Fed last month cut its overnight policy rate by a quarter of a percentage point for the second time this year, to target a range between 1.75% and 2.0%.

Williams left the door open to further adjustments to monetary policy to manage those crosscurrents, though he gave no hint of whether or when any further rate cuts may be needed, in sync with the view of Fed Chair Jerome Powell, with whom Williams collaborates closely on policy.

Asked what keeps him up at night, Williams said he was working to figure out what caused the volatility in money markets in mid-September, when a key borrowing rate on overnight cash loans temporarily spiked up to 10%.

Williams said it appeared that banks held back from lending cash and that an overall decrease in reserves held at the central bank may have contributed to the volatility.

“These reserves sitting there in accounts at the Fed basically were keeping short-term rates from moving around a lot,” he said, adding that officials were evaluating why banks did not lend cash when rates were higher.

Williams said he was looking at how “effective” their intervention has been.

“Open market operations are not a frequent operation but obviously always there as needed,” he said.

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