Fed’s Williams says well aware of market pricing but Fed is not obliged to ratify market levels
- Believes that Fed rate policy is 'well positioned’ to achieve 2% inflation target
- If inflation is not on track to hit 2% level, Fed will act in order to ensure price stability
- Strongly supported the latest FOMC decision
- Fed is very committed to getting inflation back to 2%
- Remains optimistic that inflation pressures will gradually ease
- Acknowledges uncertainty surrounding impact of Middle East conflict but expects inflation impact to cool
- Market pricing provides Fed with valuable information
- Aware of market pricing but Fed is not obliged to ratify market levels
He’s just reaffirming the Fed’s current stance following their July policy decision. Considering his more centrist/neutral position mostly (with a slight dovish lean), the remarks above fit with that as they are nothing hawkish whatsoever. So, there isn’t anything all too surprising.
The headline remark is perhaps the most notable with markets now pricing in ~63% odds of a rate hike for September next.
That being said, his statement reads more as a “I cannot confirm nor deny" if market pricing is fitting with what the Fed will do next month. So, we’ll just have to wait and see for the most part.
Upcoming economic data will play a crucial role but also how the US-Iran conflict will change in the weeks ahead. Looking to year-end, markets are pricing in ~34 bps of rate hikes with ~50 bps of rate hikes priced by the middle of next year.
This article was written by Justin Low at investinglive.com.