Terminal Pricing Pushed Higher By NY Fed's Williams

Fed terminal rate holding ~1.5bps higher at 5.15-16% for Jul on somewhat hawkish remarks by Williams’ standards:

• When asked how the Fed would respond if inflation and employment drifts lower through 1Q, he noted it would depend what is driving it (i.e. looking through energy or car prices) before emphasising there is a lot of uncertainty around the inflation outlook with various scenarios showing more persistent inflation requiring somewhat higher rates.
• While pushing broad data dependency he didn’t rule out a 50bp hike when asked if the FOMC would consider one in the future, although a 25bp hike seems the best option for now.
• China’s economy by all signs is bouncing back pretty quickly (upside risk to commod prices), seeing more positive signs globally for growth along with US resilience. Goods prices are declining but they have a ways to go, supply chains improving but NY Fed measure not fully back to normal.
• Need to maintain restrictive stance for a few years.