Daly And Williams Comments Suggest FOMC Tightening Guidance To Remain

Comments crossing from SF Fed Pres Daly (Boersen-Zeitung interview, link) and NY Fed Pres Williams (speech link) appeared to modestly push back against market-implied rate cuts in 2024 by emphasizing the potential for further hikes/restrictive policy for longer.

• NY Fed's Williams was characteristically dovish, echoing previous comments that "my assessment is that we are at, or near, the peak level of the target range of the federal funds rate" with policy "estimated to be the most restrictive in 25 years". But he noted that risks to the outlook remained two-sided and "I expect it will be appropriate to maintain a restrictive stance for quite some time", saying that "if price pressures and imbalances persist more than I expect, additional policy firming may be needed."
• Daly's interview conducted earlier this month but published today contains a cautiously optimistic outlook on inflation (policy is in a "very good place"). But risks of over- versus under-tightening are "roughly balanced", and re a hike vs pause in December, "I don't want to take any meeting off the table because we are constantly collecting data" and "The markets obviously have a different idea than we do of what the process of disinflation will look like. I'm not thinking about rate cuts at all right now."
• These comments are not a huge departure from what they've said before, but they contrast with the market's takeaway from Gov Waller earlier in the week when he eyed potential for rate cuts next year should inflation continue to moderate.
• The pre-December FOMC blackout period begins this weekend, and as it stands - Gov Waller's comments notwithstanding - we would expect the upcoming Statement to retain the tightening bias to forward guidance.