NY Fed President Williams Signals No Urgency for Rate Hike
Translated & summarized from 0404 by baba
The story in 5 lines · by baba
- NY Fed President Williams sees no immediate need for another rate hike.
- Market odds for an October rate increase fell below 50% after his comments.
- U.S. stocks closed with modest losses, while Treasury yields stayed near multi-year highs.
- Oil prices declined significantly on signs of increased Saudi exports.
- Key U.S. inflation and employment data are due soon.
New York Federal Reserve President John Williams stated on Tuesday that there is no immediate need for another interest rate hike, following the September policy meeting. This statement significantly reduced market expectations for a rate increase in October, with the probability dropping from around 70% to approximately 47% for at least a quarter-percentage-point hike.
Williams indicated that one more upward adjustment to the target range might be appropriate by the end of the year to help inflation return to the target sooner. However, he emphasized that there is still time to gather more data before making a decision. Wall Street indices, which had been declining earlier in the day, narrowed their losses, with the S&P 500 and Dow Jones closing down about 0.2%, and the Nasdaq losing around 0.1%.
During trading, the yield on 30-year U.S. Treasury bonds surpassed 5.6%, reaching its highest level since 2002. The 10-year yield remained near a peak not seen since 2007, though both long-term yields saw a slight retreat later, with the 10-year at about 5.24% and the 30-year at approximately 5.56%. The two-year yield, reflecting short-term rate expectations, moved lower.
Oil prices also fell, with Brent crude trading around $102-$103 per barrel and U.S. WTI dropping below $90, levels not seen in about a month. This decline was partly attributed to signs of recovery in Saudi exports via the Red Sea, with approximately 12.5 million barrels loaded onto nine tankers at Yanbu following the resumption of operations on the East-West pipeline, which bypasses the Strait of Hormuz.
Looking ahead, the U.S. Personal Consumption Expenditures (PCE) price index for August, the Fed's preferred inflation measure, along with private employment data, are scheduled for release. Any surprises in these figures could again shift rate expectations and yields. Despite the reduced likelihood of an immediate October hike, long-term rates remain elevated, and oil prices are still above $100 for Brent. For Israeli investors, this means continued monitoring of interest rate differentials with the U.S., the dollar exchange rate, and bond market financing costs, as the Bank of Israel's next interest rate decision is set for October 21.
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