Fed officials steer markets away from an October rate increase

Federal Reserve Vice Chair Philip Jefferson suggested that the central bank could afford to hold off on an interest rate increase for now³. Delivering a similar message on 1 October, Jefferson said any future adjustments in policy should be determined carefully⁴.

New York Fed President John Williams, a voting member of the Federal Open Market Committee, said he would rather see more data before moving, as did Jefferson^1,2. Reuters reported that the Fed is now seen skipping October but may pull the rate hike trigger in December¹.

Forbes reported that the odds of an October rate increase fell below 30 percent after officials signalled no rush². Michelle Bowman, the vice chair for supervision, said the central bank needs to understand the underlying trends in the economy better before taking any action⁹.

Why it matters to investors

The pullback in October pricing is not a consensus that tightening is over. Minneapolis Fed President Neel Kashkari said in an interview that further rate increases will likely be needed into 2027, while keeping the timing of the next one open⁷.

Dallas Fed President Lorie Logan went further, saying interest rates need to be half a percentage point higher than they are⁸. Chicago Fed President Austan Goolsbee told Fox Business Network that a rate hike and a pause are both on the table^5,6.

That spread of views means the October meeting is a genuine coin toss rather than a settled outcome, and it leaves the December meeting carrying the weight of the decision^1,6.

What to watch

ING said cooler US jobs growth supports a Federal Reserve pause in October, and that it chimes with the latest comments from Williams¹⁰. Politico reported that slowing job growth eases the pressure on the Fed to raise rates before the midterm elections³.

Investors watching the next move should track whether the hawks on the committee convert their stated preference into votes. Logan has named a specific destination for rates, and Kashkari has named a horizon, but neither has committed to October^7,8. Bowman’s call for a better read on underlying trends points to the incoming data rather than the calendar⁹.

Reuters set out the base case as a skip in October followed by a move in December, which would put the decision after the midterm elections rather than before them^1,3. The Straits Times reported that Fed policymakers as a group are leaning against an October rate hike⁴.