New York Fed's Williams says it's 'reasonable' to expect another rate hike by year-end

• Markets are pricing in a 77.5% probability of an October rate hike, up from 53% the previous day, according to CME Group's FedWatch tool
• The Fed raised its benchmark rate by 0.25 percentage points earlier in the month to a target range of 3.75%-4%
• Other Fed officials including Boston Fed President Susan Collins have signaled concern that inflation will remain 'notably' above the 2% target, supporting the case for additional rate increases

Summary:

New York Federal Reserve President John Williams stated that another interest rate hike before year-end would be a "reasonable" expectation, though the decision will depend on incoming economic data. Speaking at the London Macro Policy Forum, Williams emphasized that the Fed has ended explicit forward guidance and will instead adopt a data-dependent approach to policy decisions.

The Federal Reserve raised its benchmark interest rate by 0.25 percentage points earlier this month, bringing the overnight funds rate to a target range of 3.75%-4%. Following hawkish commentary from Fed Chairman Kevin Warsh and other officials, market expectations for additional tightening have increased significantly. CME Group's FedWatch tool showed the probability of an October rate hike jumped to 77.5% on Thursday from approximately 53% on Wednesday.

Key Officials and Statements:

• John Williams supports the possibility of another hike based on market sentiment and data
• Boston Fed President Susan Collins noted "increased likelihood" that inflation will remain "notably" above the Fed's 2% target
• Officials indicated "further policy adjustments are likely to be needed" to bring inflation down to target

Market Implications:

The shift away from forward guidance introduces greater uncertainty for investors, requiring closer attention to economic data releases. The hawkish tone from multiple Fed officials signals the central bank's commitment to combating persistent inflation, despite recent data suggesting mixed economic conditions. The sharp increase in market-implied hike probabilities reflects growing expectations for continued monetary tightening through year-end.