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Fed Officials Signal October Rate Hike Is Unlikely
The Federal Reserve is deciding whether to raise interest rates again.
Two important officials said there is no need to hurry and that they want to see more economic information first.
Because of this, investors now think an October rate increase is less likely.
Many investors instead expect one more increase in December.
The Federal Reserve raised rates in September to help slow inflation.
Inflation was still above the bank’s 2% goal in August.
Other officials said the economy could remain strong and inflation could stay high.
The next important information will come from the September jobs report.
Federal Reserve officials John Williams and Philip Jefferson urged policymakers to gather more data before deciding on another rate increase.
Markets cut the implied probability of an October 27-28 rate hike to about 25%, down from roughly 70% earlier in the week.
Investors and global brokerages now largely expect the Federal Reserve to raise rates once more this year, most likely in December.
The Federal Reserve raised its target rate by 25 basis points in September to a range of 3.75% to 4%.
Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari said further increases may be needed, but neither endorsed a specific October timetable.
- Who
- Federal Reserve officials, including John Williams, Philip Jefferson, Lorie Logan, and Neel Kashkari, are assessing the next rate decision.
- What
- Officials signaled that an October interest-rate hike is unlikely, while leaving open the possibility of another increase later this year.
- Where
- The comments were delivered at the University at Buffalo and the University of Virginia’s Darden School of Business, while other views were given in interviews and public remarks.
- When
- The comments came this week; the next Federal Open Market Committee meeting is scheduled for October 27-28.
- Why
- Officials want more economic and financial data, including inflation, bond yields, financial conditions, and the September jobs report, before deciding whether rates are high enough.
Wait for More Data
Raise Rates Further
Timing of the next hike
Wait for More Data
John Williams and Philip Jefferson said there is no urgency and that policymakers should examine additional data before making another adjustment, making an October hike less likely.
Raise Rates Further
Lorie Logan said at least another half percentage point of increases may be needed to bring inflation back toward the 2% goal.
Inflation and economic resilience
Wait for More Data
Higher bond yields may already be slowing the economy, potentially reducing the need for additional monetary tightening.
Raise Rates Further
Neel Kashkari said a resilient economy could mean inflation remains sticky and policy may need to go higher than currently expected.
Expected policy path
Wait for More Data
Markets now favor delaying another increase until December rather than delivering back-to-back hikes in October and December.
Raise Rates Further
Kashkari’s forecast includes one more rate hike this year and another next year, while Logan argued that further increases may be required.
Key facts
- Current policy rate
- The Federal Reserve’s target range is 3.75% to 4% after a quarter-percentage-point increase in September.
- October hike probability
- Traders were pricing about a 25% chance of an October increase, compared with about 70% earlier in the week.
- Expected next move
- Markets and global brokerages largely expect one more rate hike this year, probably in December.
- Inflation measure
- The personal consumption expenditures price index rose 3.4% year over year in August, above the Federal Reserve’s 2% goal.
- Bond yields
- The 10-year Treasury yield reached about 5.24% after touching a 24-year high on Thursday.
- Upcoming data
- The September jobs report is the next major economic data release for policymakers to assess.
Quotes
Philip Jefferson
Vice Chair of the Federal Reserve
“Any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks.”
CNBC TV 18
“A few additional increases in the target range would undo the FOMC’s risk management cuts from last fall.”
CNBC TV 18
John Williams
President of the Federal Reserve Bank of New York and vice chair of the Federal Open Market Committee
“There is no need for urgency”
CNBC TV 18
Sources
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