The US economy is on track by the end of next year to meet the employment and inflation hurdles the Federal Reserve has set for raising interest rates, consistent with a liftoff in borrowing costs in 2023, Fed Vice Chair Richard Clarida said on Wednesday, Report informs via Reuters.

“I believe that these … necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022,” Clarida said in a webcast discussion hosted by the Peterson Institute for International Economics. “Commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework.”

Clarida said he expects some “pretty healthy” US job gains this fall as factors holding back labor supply dissipate.

“If my baseline outlook does materialize, then I could certainly see supporting announcing a reduction in the pace of our purchases later this year,” he said during a question-and-answer session, referring to the US central bank’s $120 billion in monthly purchases of Treasuries and mortgage-backed securities.

The benchmark 10-year Treasury yield rose after Clarida’s remarks and the release of a report showing US services industry activity jumped to a record high in July.

Interest rate futures in late-morning trading priced in a high likelihood of the Fed raising its benchmark overnight interest rate, currently near zero, three times by the end of 2023.

In economic projections released in June, the median forecast of Fed policymakers was for two rate hikes in 2023.

Inflation continues to run well above the Fed’s 2% goal, but there are still 6.8 million fewer people employed than just before the onset of the coronavirus pandemic.

In his remarks on Wednesday, Clarida said he expects that gap to have been filled and the Fed’s full employment mandate to have been met by the end of 2022.

While he said he still expects current high inflation readings to come back down, if the Fed’s preferred inflation gauge comes in above 3% this year, he also said he would consider that more than a moderate overshoot of its inflation goal.

He also noted the rapid spread of the Delta variant of the coronavirus is “clearly” a downside risk, and may be what is behind the recent and surprising drop in global government bond yields, rather than any loss in traction on inflation expectations.