Philip Jefferson, Vice Chair of the Federal Reserve, stated at the Darden School of Business at the University of Virginia that committee members may need more time to assess the next policy move and are not in a hurry to raise interest rates again.

He supported raising the federal funds rate target range by 25 basis points to 3.75%–4% at the September 15-16 meeting, believing this move would help lower inflation, stabilize long-term inflation expectations, and maintain public confidence in the 2% target. The dot plot at that time indicated one more rate hike before the end of 2026.

Jefferson noted that inflation has been high for too long, with upward risks stemming from geopolitical situations and stronger-than-expected aggregate demand. High energy prices and changes in trade policy create a series of shocks that cannot be addressed in isolation; the focus must first be on data trends, outlooks, and risk balances.

He pointed out that the further rise in yields after the September meeting indicates that investors are reassessing the macro outlook. More data is needed to better judge whether inflation can return to target at a sufficient pace and whether the policy stance is appropriate. The speech took place in Charlottesville.

John Williams, President of the New York Fed, stated on Tuesday in Buffalo that there is no urgency and still expects a rate hike this year. Jefferson's remarks solidified this signal. Evercore ISI noted that the two core officials effectively ruled out consecutive rate hikes at the October 27-28 meeting, with global brokerages now generally betting on just one more hike in December.

Interest rate futures are being repriced. Following Williams' speech, the probability of a rate hike in October dropped from 68% earlier this week to below 33% on Thursday. Investors are increasing positions betting on a skipped meeting, while previously short positions betting on consecutive hikes are being covered. The widening yield spread is partly completed by the market itself, allowing the Fed to slow its actions. Beneficiaries include growth stocks sensitive to refinancing and issuers with locked-in low-cost liabilities, while those betting on an October rate hike face pressure, along with profit margins still elevated by energy and trade costs.

Kashkari remains open regarding a potential October rate hike, indicating that the committee has not reached a consensus. Federal funds futures are concentrating the remaining rate hikes for the year in December rather than October.

Source: Public Information