New York Federal Reserve President John Williams said another rate increase this year could be appropriate but that there was no reason to hurry, shifting the balance toward a December move rather than October.
Speaking at an event at the University at Buffalo, Williams said the economy was broadly in line with his outlook and that "it will likely be appropriate to raise the target range for the federal funds rate one more time later this year," Bloomberg reported on the 29th, local time. The Fed raised its benchmark rate by 0.25 percentage point on Sept. 17, its first increase since 2023.
Still, he ruled out an October move, saying the September increase had removed the urgency and bought policymakers time to gather more information. Immediately after his remarks, federal funds futures put the odds of a hike at the Oct. 27-28 meeting at about 50%, down from roughly 70%.
Williams projected inflation of 3.5% this year and a rate slightly above the Fed's 2% target in 2027.
Signs of cooling in consumption and employment are also tilting the balance toward a hold. The Conference Board's U.S. consumer confidence index fell to 81.9 in September (1985=100) from 88.6 in August, a drop of 6.7 points. The reading came in well below the 89.0 expected by economists surveyed by Dow Jones and marked the lowest level since April 2014.
Job openings fell by 256,000 in August to 7.079 million, below market expectations of 7.225 million, according to the Labor Department's Job Openings and Labor Turnover Survey.
The next turning point is the August personal consumption expenditures price index. The PCE gauge, the Fed's preferred inflation measure, is expected to rise from the previous month, reflecting higher oil prices in August. Bloomberg forecast a 0.3% monthly gain in both the headline index, which covers all items including food and energy, and the core index, which excludes those categories. On an annual basis, the headline rate is projected at 3.7% and the core rate at 3.3%, far above the Fed's 2% target.
One wild card is a change by the Bureau of Economic Analysis, which publishes the PCE data, in how it measures spending on software, investment management and legal services. The revised methodology takes effect for the first time with the annual revisions in September, released the same day. The Wall Street Journal estimated that the new approach would lower the core PCE rate by 0.2 percentage point from the previous method. The annual headline rate is expected to fall from 3.7% to as low as 3%.
