▲ John Williams, President of the Federal Reserve Bank of New York
John Williams, President of the Federal Reserve Bank of New York, stated on the 29th local time that it may be appropriate to raise the benchmark interest rate one more time by the end of this year.
However, he added that there is no need to rush.
As a result, market expectations for a rate hike at next month's Federal Open Market Committee meeting have significantly receded.
According to Bloomberg, Williams said in a speech at the University at Buffalo in New York that if the economy evolves broadly in line with his expectations, it may be appropriate to adjust the target range for the federal funds rate upward one more time later this year to ensure inflation returns to target in a more timely manner.
He then emphasized that due to the policy action taken at the September meeting, there is no need to rush and time is available to gather more information.
The Federal Reserve raised the benchmark interest rate by 25 basis points on the 16th to a range of 3.75 to 4.00 percent, marking the first hike since 2023.
According to CME FedWatch, following Williams' speech, the probability of a rate hike priced into the federal funds futures market for the Federal Open Market Committee meeting scheduled from October 27 to 28 dropped from 70.9 percent to 50.4 percent.
Evercore ISI interpreted in a client note that this is most consistent with skipping October and raising rates in December.
Williams cited the conflict in the Middle East and the construction of artificial intelligence infrastructure as major drivers of inflation.
He explained that the inflationary effects of demand shocks related to artificial intelligence, in particular, are becoming increasingly evident.
On the other hand, he diagnosed that tariffs no longer contribute to rising goods prices.
He projected inflation to be 3.5 percent this year and expects it to reach the 2 percent target only in 2028.
Williams, who serves as a permanent voting member and vice chair of the Federal Open Market Committee, told reporters after his speech that the proximity of the October meeting to the November midterm elections was not a factor at all.
On the same day, other Federal Reserve officials joined in favoring rate hikes.
Alberto Musalem, President of the Federal Reserve Bank of St. Louis, said in a speech in London that monetary policy remains somewhat accommodative even after the September hike.
Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated that if permanent or very persistent supply shocks begin to emerge, consideration should be given to responding to such sustained shocks.
Federal Reserve Governor Michael Barr also stated in a speech at the Economic Club of Detroit that a clear trend of inflation returning to 2 percent in a timely manner is not yet visible, hinting at the possibility of additional hikes.
(Photo: Getty Images)
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