Fed's Jefferson Signals Patience as October Rate-Hike Odds Fall to About 20%

Full report

Speaking at the University of Virginia's Darden School of Business on Thursday, Jefferson said officials may need more time to decide on next steps even as inflation risks tilt to the upside. Future policy, he said, should be based on economic trends, forecasts and a balanced assessment of risks. He had supported September's 25-basis-point hike.

Markets reacted quickly: the CME FedWatch tool now puts the chance of at least a 25-basis-point hike in October at about 28%, down from nearly 69% a week earlier; Polymarket betting implies odds of about 23%. Dow Jones Newswires noted that money markets have removed roughly 13.5 basis points of expected tightening through mid-next year, and the two-year Treasury yield fell nearly 10 basis points.

Data released the same day also supported sentiment: US second-quarter GDP growth was revised up to an annualized 2.2%, and August PCE inflation rose 0.2% on the month. US stocks closed higher Thursday — the S&P 500 gained 0.23% to 7,668.82, the Dow rose 0.06% to 50,935.89 and the Nasdaq added 0.07% to 26,871.60 (preliminary data). Energy shares led gains of nearly 2%, helped by higher oil prices; Accenture surged after forecasting full-year revenue growth above estimates, lifting software stocks.

Context

The Fed's next policy meeting is scheduled for October 27–28. New York Fed President John Williams also said this week there is "no need for urgency" and that the central bank has time to assess incoming data.