Two senior Federal Reserve officials this week pushed markets to drop bets on an interest-rate increase at the central bank's late-October meeting, arguing policymakers need more time with incoming data. Brokerages now largely expect the Fed's next hike to land in December instead.
Speaking at the University at Buffalo on Tuesday, Williams said "there is no need for urgency" on changing the current stance of monetary policy. Williams also serves as vice chair of the Fed's rate-setting Federal Open Market Committee, and his remarks were the pivotal event that helped wash away expectations of an October hike.
Jefferson echoes the call for patience
Fed Vice Chair Philip Jefferson followed on Thursday, telling the Darden School of Business at the University of Virginia that future policy adjustments should come from carefully examining the data, the evolving outlook, and the balance of risks. He said markets are reassessing the outlook amid rising bond yields, and that officials need their own judgment on monetary policy, which may take more time. Jefferson's remarks locked in the shift in sentiment that Williams had started.
Markets shift bets to December
The Fed raised its rate target by a quarter percentage point at its mid-September meeting, to between 3.75% and 4%, and officials' own forecasts pointed toward one more increase this year. High inflation had driven investors to price in even more hikes than officials projected, including a strong view that the Fed would move again in late October. Markets now see the Fed holding steady this month but raising rates at the December 8-9 FOMC meeting instead.
Kashkari flags upside risks
Minneapolis Fed President Neel Kashkari told Reuters he is open-minded on timing and does not have a strong view on whether the next hike should come at month's end. His current forecast holds one more increase this year and another next year, though he noted the economy has outperformed his expectations since September. Kashkari added that if the economy proves resilient and inflation proves stickier than he expects, policy could need to go higher than he currently anticipates.
All three officials expect inflation to ease over time but remain wary of the pace. Jefferson said he sees inflation staying elevated near term before resuming its decline toward the Fed's 2% goal as the effects of energy and other price shocks fade, though he views the risks to that forecast as tilted to the upside. The next major data point is Friday's September jobs report.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
