Sharp reversal in December rate-cut expectations… "Williams' remarks strengthen market conviction"

Opinions within the U.S. Federal Reserve (Fed) have been divided over the direction of interest rates, leaving market outlooks for a December rate cut uncertain for some time, but the mood appears to have shifted sharply after comments by John Williams, president of the New York Fed.

On the 24th (local time), according to O'Daily, Williams directly said, "there is room to adjust rates further in the short term," and among investors and economists the dominant view became that the Fed is very likely to cut rates at the next meeting.

Economists have also voiced that a cut is necessary. Tom Porcelli, chief economist at Wells Fargo, said the recently deteriorated labor market provided a rational basis for a rate cut, as the September unemployment rate surged to 4.4%, marking the highest level in about four years.

Matthew Luzzetti, U.S. chief economist at Deutsche Bank, also described the labor market as "still in an unstable state." In particular, Josh Hurt, chief economist at Vanguard Group, cited Williams' remarks as the decisive factor in the shift in sentiment, saying, "Chair Powell, President Williams, and Governor Waller have all started to put more weight on easing."

However, not all Fed officials share the same view. Boston Fed President Collins and Dallas Fed President Logan remain cautious about a December rate cut. It was also pointed out as a variable that the Fed may have to make decisions without having obtained the latest employment and inflation data due to the government shutdown.