Economist: Rate Cut in December Once Again Becomes a High Probability Event, Williams' Speech Sets Major Tone for the Market

On November 24th, William Williams, the President of the New York Fed who is an ally of Powell, set a significant tone for the market with his speech last Friday. This made a December rate cut by the Fed once again a highly probable event. Williams' statement was interpreted as a collective signal from the top Fed officials, resulting in a significant adjustment in market expectations. Josh Hirt, the Senior Economist at Vanguard, pointed out that in his personal opinion, the Fed will cut interest rates. Williams' stance implies support for a new round of easing by the Fed's three most influential officials - Powell, Williams, and the Fed Board Governor Waller. "We believe this is a heavyweight camp that is difficult to shake." The Fed's communication - especially at the highest levels - is rarely accidental. Signals from the top, especially from the Chair, Vice Chair, and the highly influential President of the New York Fed, are carefully considered: they must convey a clear policy direction while avoiding triggering an excessive market response. This is also why Williams' speech last Friday was of great significance to the market. In his position, he is one of the members of the Fed's leadership "Big Three", the other two being Chair Powell and Vice Chair Jefferson. When Williams hinted at "the possibility of further rate adjustments in the near term", investors interpreted it as a clear signal released by the leadership: the Fed leadership is inclined to cut rates at least once in the near future, with the most likely timing being the December Federal Open Market Committee (FOMC) meeting. After Williams' speech last Friday, the probability of a 25 basis point rate cut by the Fed in December rose to 71.3% and is now at 67.3%. The bet on a December rate cut heated up again, with the probability of a rate cut in December dropping below 30% at one point.