New York Federal Reserve President John Williams said there is no urgency for further rate increases, signaling the Federal Open Market Committee is comfortable holding policy steady.
The remarks eased bond market concerns about additional tightening. The two-year Treasury yield fell three basis points, and fed funds futures now price an 85 percent chance of no change at the next FOMC meeting in November.
Williams noted that recent economic data, while robust, does not indicate a need for more restrictive policy. Core inflation metrics have shown gradual deceleration over recent months, supporting a wait-and-see approach. The Fed believes current policy is sufficiently restrictive to achieve its mandate without additional hikes.
The yield curve, inverted for more than two years, saw slight steepening at the front end as short-term yields adjusted lower. The ten-year Treasury held relatively steady, maintaining spread compression against longer-dated bonds.
The Personal Consumption Expenditures price index, the Fed's preferred inflation gauge, is due October 27. The FOMC will hold its next policy meeting November 1-2.
