Federal Reserve Board Governor Philip Jefferson indicated in a recent speech that the FOMC is likely to maintain steady rates at its October meeting, signaling a shift in policy expectations as market participants reassess economic conditions.
Speaking in Virginia, Jefferson stated that he sees no urgency for further rate increases despite supporting the September rate decision. "As we look ahead, my view is that any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks," he said. He noted that since the September FOMC meeting, yields across the term structure have increased further, indicating investors are reassessing the macroeconomic landscape.
Jefferson's remarks align with recent comments from New York Fed President John Williams, who previously stated he sees no urgency for immediate moves on monetary policy. The Fed implemented its first rate hike since 2023 at the September FOMC meeting, citing inflation concerns.
Minneapolis Fed President Neel Kashkari took a more cautious stance in a Reuters interview, saying he is open-minded about October but expects further rate increases heading into the new year. Kashkari continues to emphasize concerns about rising inflation and believes the Fed needs additional hikes to reach its 2% inflation target.
Following the Fed officials' statements and the release of softer PCE inflation data, Goldman Sachs shifted its forecast for a second rate hike to December and suggested additional increases may be unnecessary.
Market expectations have shifted significantly. Prediction market data shows a 77% probability that the FOMC will hold rates steady in October, down from 70% odds of a hike one week prior. The probability of an October rate increase now stands at 23%.
