US Stocks Climb as Fed's Williams Hints at Near-Term Rate Cut
Comments from influential New York Fed President John Williams bolster investor hopes for continued monetary easing, even as he acknowledges a temporary stall in inflation progress.
U.S. equity futures surged in early Friday trading after New York Federal Reserve President John Williams signaled the central bank could cut interest rates "in the near term," providing a significant boost to markets hoping for a dovish pivot.
Speaking at an event, Williams, who serves as the influential vice chair of the Federal Open Market Committee (FOMC), suggested that current monetary policy is “modestly restrictive,” creating room for an adjustment. His comments came as a welcome surprise to investors, especially as he acknowledged that recent progress on cooling inflation has “temporarily stalled,” with his own estimates pegging it around 2.75%.
The explicitly dovish tone from a key member of the Fed's leadership trio sent an immediate ripple through financial markets. Futures tied to the S&P 500 rose 0.8%, while those for the tech-heavy Nasdaq 100 jumped 1.1%. In the bond market, Treasury yields dipped, with the 10-year note falling as investors priced in a higher probability of looser monetary conditions.
Williams’ remarks, made during a speech at the Central Bank of Chile, are particularly noteworthy because they suggest a willingness to ease policy even if inflation remains stubbornly above the Fed’s 2% target. "To keep our two goals of price stability and maximum employment in balance, there's room for a further adjustment in the near term to the federal funds rate," Williams stated, according to reports from Bloomberg and The Wall Street Journal.
This sentiment, however, does not appear to be universally shared within the central bank. Recent reports indicate “strongly differing views” among FOMC participants about the appropriate path forward. Several policymakers are believed to be hesitant to support further rate cuts until there is more definitive evidence that inflation is on a sustainable path back to its long-term target.
The divided sentiment is mirrored on Wall Street. While Williams' comments may increase speculation of a rate cut at the Fed’s December meeting, some major institutions remain cautious. This week, analysts at Morgan Stanley shifted their forecast, stating they no longer expect a December rate reduction, pointing to persistent inflation and a resilient labor market as reasons for the central bank to hold steady.
Investors are now left to weigh the dovish stance of the New York Fed president against a backdrop of mixed economic signals and a fractured committee. The market’s enthusiastic response on Friday underscores a deep-seated desire for lower borrowing costs to support corporate earnings and extend the recent equity rally. The coming weeks, including the next round of inflation and employment data, will be critical in determining whether Williams' hint at a near-term cut solidifies into official policy or remains a subject of internal Fed debate.