NEW YORK — New York Federal Reserve President John Williams on Tuesday dismissed the case for an October interest rate increase, telling investors the central bank has "time to gather more information" after the September hike. "I see no need for urgency," Williams said in Buffalo.
The market repriced immediately. Fed funds futures, which had priced a 70 percent October hike probability on Monday, fell to roughly 50 percent by Tuesday—a whipsaw that compressed short-end yields as traders wiped duration risk off their books ahead of the Oct. 27-28 FOMC meeting.
Williams flagged one additional rate increase "late this year," which market participants widely interpret as a December move. That reading aligns with the median FOMC projection released in September and signals the rate-hiking cycle is nearing its end.
The repricing tightened the 2-year/10-year spread as the market trimmed its near-term terminal rate assumption. Investors holding short-duration fixed income shed duration risk on the signal, while those long the front end locked in gains.
Williams, vice chair of the FOMC, cited a 3.5 percent year-end inflation forecast. He flagged "the inflationary impact of the AI-related demand shock" as increasingly relevant—a change from his spring outlook, when he had expected oil prices to decline and inflation to ease organically. "We now expect somewhat larger and longer-lasting effects from energy prices on inflation," Williams said.
