Traders Predict Fed to Keep Rates Steady, But Chance of Increase Remains

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New York Fed President John Williams expressed his lack of interest in the Federal Reserve taking any immediate action on interest rates, stating that the central bank’s monetary policy is currently in a “good place.”

In an interview with the New York Times, Williams acknowledged that current interest rates are high enough to put downward pressure on inflation, which the Fed views as “restrictive.”

According to Williams, “monetary policy is in a good place. We’ve reached the necessary level.”

The future course of action regarding interest rates will depend on the data, as stated by Williams. He believes that since monetary policy is currently keeping the economy moving in the right direction due to its restrictive stance, there is no immediate or specific need for action.

Currently, the Fed’s target range is set between 5.25% and 5.5%, the highest it has been in two decades.

In June, the median forecast produced by Fed officials included one 25-basis-point rate hike.

While some economists expect the Fed to maintain its current policy during the upcoming September meeting and raise rates at the November meeting, many others believe that the era of increasing interest rates has reached its end.

Title: Traders Predict Fed to Keep Rates Steady, But Chance of Increase Remains

Traders in derivative markets have indicated a strong possibility – nearly 90% – that the Federal Reserve will maintain current interest rates following its upcoming meeting on Sept. 19-20. However, they assess the likelihood of another rate hike before the year ends at around 30%.

According to an interview with John Williams, President of the Federal Reserve Bank of New York, the Fed is committed to maintaining controlled inflation while carefully monitoring policy to prevent any potential harm to the economy. Williams expresses confidence in the current state of the economy, noting that overall economic data is heading “in the right direction”.

Tim Duy, chief U.S. economist at SGH Macro Advisors, believes that although the data will eventually support another rate increase later this year, sufficient time will be needed for this argument to materialize.

Looking ahead to next year, Williams outlines his criteria for potential rate cuts. He explains that if inflation decreases as predicted, the Fed will be compelled to reduce rates, as maintaining current levels would inadvertently tighten policy.

Market expectations currently indicate the first rate cut will occur in March. Meanwhile, stock markets, including DJIA and SPX, saw increases on Monday. In addition, the yield on the 10-year Treasury note BX:TMUBMUSD10Y rose to 4.07%.

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