WASHINGTON (AP) — Two Federal Reserve officials said Monday that they favor raising the Fed's key rate to roughly 5% or more and keeping it at its peak through next year — longer than many on Wall Street have expected.

John Williams, president of the Federal Reserve Bank of New York, who is among a core group of officials around Chair Jerome Powell, said in a speech to the Economic Club of New York that the central bank has "more work to do" to reduce inflation closer to its 2% target.

And James Bullard, president of the St. Louis Fed, suggested that financial markets are underestimating the likelihood the Fed will have to be more aggressive in its fight against the worst inflation bout in four decades.

The Fed has raised its benchmark short-term rate six times this year, to a range of 3.75% to 4%, with each of the last four hikes being a historically large three-quarters of a point. The central bank is expected to raise rates by an additional half-point when it next meets in mid-December. Though that would represent a reduction in the size of its rate hikes, Fed officials have stressed that they expect to keep their key rate at a historically high level well into the future.

Because the Fed's benchmark rate influences many consumer and business loans, its aggressive series of hikes have made most loans throughout the economy sharply more expensive. That has been particularly true of mortgage rates, which have risen dramatically over the past year and have severely crimped home sales.

On Wednesday, Powell is scheduled to address the Fed's policies and their effects on the job market in a speech in Washington.

In an interview with Marketwatch, Bullard suggested that the speed of the Fed's rate hikes isn't as important as the ultimate level of its benchmark rate, which he said could exceed the 5% that financial markets have priced in.

"Markets are underpricing the risk that the (Fed) will have to be more aggressive rather than less aggressive in order to contain the very substantial inflation that we have," Bullard said.

The central bank, he added, will likely have to keep its benchmark rate above 5% all through 2023 and into 2024. He also reiterated his view that the Fed should be prepared to raise that rate to the "lower end" of a range between 5% and 7%.

By contrast, financial markets have projected that the Fed will have to reverse course and start cutting rates by next September, presumably in response to a recession that many economists expect will occur next year.

Williams suggested that there are some positive signs that inflation is easing, noting falling prices for lumber, oil, and other commodities. Supply chains are also loosening, he said: A measure of supply chain snarls maintained by the New York Fed has declined by three-quarters from its pandemic peak.

Yet the job market has stayed stronger than he expected, Williams said, with the unemployment rate, at 3.7%, still near a half-century low.

"That argues that we'll need to have a somewhat higher path for interest rates" than the Fed projected in September, Williams said. At that time, the officials forecast that their benchmark rate would reach a range of 4.5% to 4.75% by early next year.

He said he now expects the unemployment rate to rise to 4.5% to 5% by the end of next year, with inflation falling to 3% to 3.5% by then.

At that level, inflation would still exceed the Fed's target of 2%, thereby extending its inflation fight into 2024, Williams said.