Economist: A rate cut in December has once again become a high-probability event, and Williams' remarks set a heavy tone for the market.

On November 24, Powell's ally, New York Fed President Williams, made remarks last Friday that set a heavy tone for the market, making a December rate cut by the Fed a high-probability event again. Williams's statement was interpreted as a consensus signal among the Fed's senior officials, leading to a significant adjustment in market expectations. Vanguard's senior economist Josh Hirt pointed out that he personally judges that the Fed will cut rates, and Williams's position means that the three most influential officials of the Fed—Powell, Williams, and Fed Governor Waller—are all supportive of a new round of easing actions. “We believe this is a very weighty camp that is hard to shake.” The Fed's communication—especially at the highest levels—is rarely coincidental. Signals from the top, particularly statements from the Chair, Vice Chair, and the highly weighted New York Fed Chair, are carefully weighed: they must convey a clear policy direction while avoiding triggering excessive reactions in the financial markets. This is precisely why Williams's speech last Friday was significant for the market. By virtue of his position, he is one of the members of the Fed's leadership “trio,” the other two being Chair Powell and Vice Chair Jefferson. When Williams hinted at “the possibility of further rate adjustments in the short term,” investors interpreted it as a clear signal released by the leadership: the Fed's leadership is inclined to cut rates at least once more in the near future, with the most likely timing being the December Federal Open Market Committee (FOMC) meeting. After Williams's speech last Friday, the probability of a 25 basis point rate cut in December rose to 71.3%, up from 67.3%. The bet on a December rate cut has once again heated up, after the probability of a rate cut briefly fell below 30%.