Federal Reserve Vice Chair Philip Jefferson and New York Fed President John Williams delivered separate speeches this week, collapsing investor expectations for another rate hike this month. Federal funds futures pricing for the Oct. 27-28 Federal Open Market Committee meeting fell to around 25 percent by Thursday, down from 70 percent on Tuesday.
Both officials indicated the Fed has sufficient time to evaluate economic conditions before considering further rate adjustments. The market's sharp repricing also incorporated softer-than-expected inflation data released between the two speeches.
Chairman Kevin Warsh has consistently opposed explicit forward guidance, urging investors to focus on economic data rather than Fed signals. Yet his top deputies' remarks provided a clear message to traders—one interpreted as authoritative by major market participants.
Michael Feroli, chief U.S. economist at JPMorgan Chase, characterized the two speeches as an effort to manage market expectations, signaling policymakers do not need consecutive rate hikes and can allow more time between adjustments.
Goldman Sachs economists said the combined impact of Jefferson and Williams' remarks solidified their view that an October hike is improbable.
