Fed officials clearly advocate for interest rate cuts, and the market expects the probability of a Fed rate cut in December to soar to over 70%.

Odaily News After Federal Reserve officials previously publicly disagreed on the level of interest rates, the market was generally skeptical about the Fed's expected rate cut on December 10. However, after New York Fed President Williams expressed support for a rate cut, there was a dramatic shift in market sentiment, with investors and economists widely believing that the Fed is likely to take action to cut rates in December. Tom Porcelli, chief economist at Wells Fargo, stated that the deterioration of the labor market is sufficient to justify a rate cut by the Fed in December. Official data shows that the unemployment rate rose to 4.4% in September, the highest level in nearly four years. Matthew Luzzetti, chief U.S. economist at Deutsche Bank, bluntly stated that the job market remains “in a precarious state.” Josh Hirt, senior economist at Vanguard Group, revealed that his personal judgment on the Fed cutting rates is largely based on Williams' public remarks last Friday. As a close ally of Fed Chair Powell, Williams clearly advocates for a rate cut and stated that “he still believes there is room for further adjustments to interest rates in the short term.” This statement directly ignited financial markets, with expectations for a rate cut in December soaring from nearly 40% a day earlier to over 70%. Josh Hirt pointed out that Williams’ position means that the three most influential officials at the Fed—Powell, Williams, and Fed Governor Waller—support a new round of easing, which is a “very weighty camp, difficult to shake.” Krishna Guha, global head of policy and central bank strategy at Evercore ISI, analyzed that the phrase “in the short term” is most directly interpreted as the next meeting (i.e., the December meeting). He believes that signals sent by the “trio” leading the Fed are almost always approved by the chair. Despite the warming consensus on a rate cut, economists still expect that there will be officials voting against it at the meeting. Boston Fed President Collins and Dallas Fed President Logan have both expressed hesitation about further rate cuts. Former Cleveland Fed President Mester analyzed that Powell may use the news conference on December 10 to convey a key message: this rate cut is an “insurance rate cut,” after which the Fed will watch the economic response. It is noteworthy that due to the government shutdown, the Fed will not be able to obtain the latest employment and inflation data at this meeting. (Jin10)