New York Fed’s Williams Says Another Rate Hike by Year-End Is ‘Reasonable’

New York Federal Reserve President John Williams stated on Thursday that investors should consider another interest rate increase by the end of the year a “reasonable” possibility. Speaking at the London Macro Policy Forum, Williams noted that market sentiment indicates such a move may be appropriate, though he emphasized that the central bank remains data-dependent.

“That seems to me a reasonable way of thinking about it. But we have to see. We’re going to collect the data and do what we did between July and September,” Williams said. He also signaled a shift in the Federal Reserve’s communication strategy, declaring that the era of explicit forward guidance is over. This stance aligns with Fed Chairman Kevin Warsh, who has indicated that policymakers will refrain from directly signaling their intentions for upcoming meetings, opting instead to assess incoming economic indicators before making decisions.

Williams’ comments followed a quarter-point rate hike earlier in September, which pushed the federal funds rate into a target range of 3.75% to 4%. His remarks, alongside those from other central bank officials, have intensified market expectations for further tightening. According to CME Group’s FedWatch tool, the probability of an interest rate increase in October rose to 77.5% on Thursday, up significantly from approximately 53% the previous day.

Recent economic data continues to paint a picture of a resilient U.S. economy alongside persistent inflation pressures. Inflation has remained above the 3% mark, and Boston Fed President Susan Collins warned on Wednesday that there is an “increased likelihood” price levels will stay “notably” above the central bank’s 2% target. Fed Governor Michael Barr echoed these concerns, stating that “further policy adjustments are likely to be needed” to ensure inflation returns to target in a timely manner.