NY Fed president floats chance of a rate cut in ‘near term' – sparking bets on December cut

Core Viewpoint - New York Fed President John Williams indicated that there is potential for further interest rate adjustments in the near term, primarily due to labor market weaknesses overshadowing inflation concerns, which has led traders to increase their expectations for a quarter-point cut at the Fed's December meeting [1][4][13]. Interest Rate Outlook - Williams stated that monetary policy is currently "modestly restrictive" but less so than before recent actions, suggesting that there is room for further adjustments to align the federal funds rate closer to neutral [2][4]. - Following Williams' comments, the odds of a rate cut increased significantly from 39% to nearly 75% [4]. Labor Market Insights - The recent jobs report showed that employers added 119,000 jobs in September, exceeding expectations of 50,000, although the unemployment rate rose to 4.4%, the highest since October 2021 [6][10]. - Philadelphia Fed President Anna Paulson expressed concerns about the labor market, indicating that the better-than-expected job growth might lead officials to maintain current rates, especially with upcoming labor data being delayed until December [5][9]. Analyst Perspectives - Global brokerages are divided on the implications of the mixed jobs data for the December interest rate decision, with some firms like JPMorgan and Standard Chartered withdrawing their forecasts for a rate cut, while others like Deutsche Bank and Citigroup maintain their predictions for a quarter-point cut [9][10][12]. - Analysts noted that the absence of November labor data could complicate the decision-making process for Fed officials [9][12]. Economic Conditions - Williams highlighted that downside risks to employment have increased as the labor market cools, while upside risks to inflation have lessened, indicating a shift in economic conditions [13]. - The concentration of job gains in acyclical sectors like healthcare may signal a potential economic slowdown, despite resilient consumer spending trends [15][16].