"December rate decision is like a coin toss"…cut probability 100→30→70%

New York Fed president's remark "there is room for further cuts"

Cut probability in one day 39%→75%

Inside the Fed, opinions split evenly between cuts and holds

Boston Fed president rebuts "it's not time for easing"

Amid a tight split within the U.S. central bank (Fed) over a December policy rate cut, John Williams, president of the New York Federal Reserve Bank, signaled support for a December rate cut and stirred market expectations. Immediately after his remarks, the probability of a cut nearly doubled in one day, rising into the 70% range.

Williams said on the 21st at an event hosted by the Central Bank of Chile in Santiago that regarding the Fed's monetary policy, "I see there is still room to adjust the policy rate further in the near term." He said, "Although recent Fed (rate cut) actions have somewhat reduced it, I view the current stance of monetary policy as mildly restrictive."

Williams cited that inflation has been less severe than expected and that employment has slowed more noticeably than expected. He estimated that tariff policy likely raised U.S. inflation by about 0.5∼0.75% percentage points, saying this is weaker than the 1∼1.5% percentage point projection presented last September.

He said, "Inflation will return to the 2% target level in 2027," and predicted that the price impact from tariffs will be one-off. On employment, he said, "Economic growth has slowed compared with last year and the labor market is gradually cooling."

According to the Chicago Mercantile Exchange (CME) FedWatch, immediately after the remarks the probability of a December Fed policy rate cut surged from 39% to 75%. As of the 23rd, it still exceeds the 70% range. Until just before the October FOMC, the market had taken a December cut as a given, but subsequent hawkish remarks from Fed officials including Chair Jerome Powell pushed the cut probability down below 30%.

Looking at remarks from FOMC voting members this year, opinions on cuts versus holds are split evenly. The trade-off between slowing employment and price stability has deepened the dilemma, and judgments have become more difficult as key economic data releases were canceled or delayed due to a federal government shutdown (temporary suspension of government operations).

Votes against unanimity, rare under the Powell chairmanship, have surged this year. Since June, there has not been a single unanimous decision. Former Fed economist Claudia Sahm said, "Chair Powell's restraint in speaking has allowed all FOMC members to voice their opinions," and added, "(The December rate decision is) really at the level of a coin toss."

The day after Williams's remarks, Boston Fed President Susan Collins opposed additional cuts, saying "(the stance of monetary policy) is somewhat tilted toward containing inflation." She said, "Overall financial conditions are closer to a tailwind than a headwind," and "In such an environment there is no urgency to further ease monetary policy."

Reporter Dayeon Im allopen@hankyung.com