Fed officials wash away market bets on October rate increase
TLT•Comments from Federal Reserve officials John Williams and Philip Jefferson helped markets price out an October rate increase, while investors now expect the next hike in December. The Fed raised its target range to 3.75%–4% in September, and officials’ forecasts pointed to one more increase this year.
1. October hike bets fade
Williams said there was “no need for urgency” in changing monetary policy, and Jefferson said future adjustments should follow careful examination of economic data and risks. Their comments helped remove market expectations of a rate increase at the October 27-28 meeting.
2. December hike expected
Global brokerages now largely expect one more Fed rate increase this year, in December rather than October. Kashkari said he was open-minded about the timing of the next increase; his forecast includes one more hike this year and another next year.
3. Inflation and jobs in focus
The three officials expect inflation to ease over time but remain wary about how quickly it will decline. Jefferson said he sees inflation staying elevated in the near term, and the September jobs report is the next major data point for Fed officials.
