John Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, speaks at an Economic Club of New York (ECNY) event on Thursday, September 4, 2025 in New York, USA.
David Dee Delgado | Bloomberg | Getty Images
Communication in the Federal Reserve System, especially at the highest levels, rarely happens by chance.
Messages from the top, particularly the chair, vice chair, and influential New York Fed president, are carefully evaluated and tailored to convey clear ideas about policy without provoking an undue reaction in financial markets.
That’s why current New York Fed leader John Williams’ Friday speech was so important to markets. His position makes him a member of the Fed’s leadership troika, which also includes Chairman Jerome Powell and Vice Chairman Philip Jefferson.
So when Williams nodded to the possibility of “further interest rate adjustments in the near future,” investors took it as a message from above that leadership was leaning toward at least another rate cut soon (perhaps at the Federal Open Market Committee meeting in December).
“There is some ambiguity in the term ‘near term’, but the most obvious interpretation is at the next meeting,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note to clients.
“And while Mr. Williams may have expressed a personal view, signals from other members of the Fed leadership troika (vice chair, New York Fed president) on major policy issues are almost always approved by the chair, and issuing this signal without approval from Chairman Powell would be professional malpractice,” he added.
Williams’ comments on interest rates come at a particularly sensitive time for the Fed and financial markets.
The policy-making FOMC, usually a consensus-driven group sometimes accused of lacking diversity of thought, suddenly found itself divided.
On the one hand, there are officials who believe that policy is still holding back growth and there is room for adjustment, while on the other, the other is represented by those concerned about inflation, who believe there is no need for further interest rate cuts and solid economic growth is expected, especially given the cuts already posted in September and October.
Mr. Williams offered little insight into the long-term trajectory of interest rate expectations, but it appears Fed executives support lower rates, at least in the short term.
This is especially important for financial markets, which have recently been reeling from concerns about an artificial intelligence bubble, as well as geopolitical concerns and continued uncertainty over the Federal Reserve’s monetary policy.
Stocks rose on Friday, with futures buoyed by Mr. Williams’ remarks that sent the market rallying again on expectations for a December rate cut. Continued concerns about AI have tempered the rally, but traders remain betting on the move in December, with a 73% chance of a rate cut, according to CME Group’s FedWatch index.
Mr. Williams likely saved the market on Friday from a potential selloff that is taking shape, with non-tech stocks generally holding firm and the outlook for lower interest rates supporting the major averages. Major benchmarks were hit hard on Thursday, and investors feared another big drop on Friday. Major average stock prices fluctuated in the morning, but reached new highs heading into afternoon trading.
S&P500, 5 days
“Chairman Williams’ intervention comes after several other Fed chairmen have expressed reservations about (December) but withdrew their definitive statements,” Guha said. “Perhaps this signals that he recognizes that the (December) fight is turning into a governance crisis at the Fed and recognizes the need to give Powell space to speak.”
Admittedly, other speakers were less enthusiastic than Williams.
Boston Fed President Susan Collins and Dallas Federal Reserve President Laurie Logan both expressed reluctance to cut rates further. Collins expressed concerns about inflation in an interview with CNBC. Logan was even more hawkish, saying he wasn’t even sure he voted for the last two cuts. Mr. Collins will vote on the FOMC this year, and Mr. Logan will be eligible to vote in 2026.
