It's reasonable to expect another rate hike by the end of the year, New York Federal Reserve President John Williams said early Thursday. But the market thinks there could even be two.

Traders are pricing in a 75% chance of a 25-basis point hike next month, up from 71% Wednesday and 55% a week ago, according to CME's FedWatch tool. The odds of two more hikes by the end of the year currently stand at 58%, up from 42% last week.

It comes as the 30-year Treasury yield rose to 5.446%-its highest level since 2004. The 10-year yield rose to 5.145% after settling at 5.113%, its highest level since 2007.

Inflation is the "big challenge" for policymakers, Williams said at the London Macro Policy Forum in London. He added that the Fed still has "a lot of work to do."

Market expectations show "it's likely that another rate hike may be appropriate by the end of the year. That seems to me a reasonable way of thinking about it," he added.

It may be as close as investors get to forward guidance, something which Fed Chairman Kevin Warsh has moved to scrap. "The time for specific, very direct forward guidance is over," Williams said.

The central bank raised its target for the federal-funds rate by a quarter-point to a range of 3.75% to 4% earlier this month.