Fed’s Jefferson Signals October Rate Pause as Rate Hike Odds Fall

Federal Reserve Board Governor Philip Jefferson has suggested that the FOMC is likely to hold rates steady at the October meeting. This comes as crypto traders continue to price in a hold following the latest macro data point, with the odds of an October Fed rate hike sharply declining this week.

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Jefferson Hints October Fed Rate Hike Unlikely

In a speech delivered in Virginia, the Fed governor suggested that he doesn’t see any urgency to make any further hikes, despite supporting the September Fed rate decision. “As we look ahead, my view is that any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks,” he said.

Furthermore, he noted that since the September FOMC meeting, yields across the term structure have increased further, signaling that investors are reassessing the macro landscape. Jefferson added that he and other officials will need to come to their own judgment, which “may take more time,” suggesting that a Fed rate hike at the next meeting is unlikely.

The Fed governor’s statement echoes that of New York Fed President John Williams, sho earlier said he doesn’t see any urgency for them to make an immediate move on monetary policy. The Fed made the first rate hike since 2023 at the September FOMC meeting last month, citing inflation concerns.

Following Williams’ statement and the soft PCE inflation data released yesterday, Goldman Sachs has notably pushed its second Fed rate hike forecast to December. The bank also said that the Fed may consider additional rate increases unnecessary.

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Neel Kashkari Open-Minded On October Decision

In a Reuters interview, Minneapolis Fed President Neel Kashkari said he is open-minded about how the Fed should proceed with potential rate increases and doesn’t have a strong view on whether the next Fed rate hike should happen at the October meeting. However, he expects that they will need to make further rate increases heading into the new year.

The Fed president has continued to raise concerns about rising inflation and believes the Fed needs more rate increases to bring inflation down to its 2% target. He also believes that further hikes could be necessary as the economy continues to outperform.

Amid these Fed statements, crypto traders have reduced their bets on an October Fed rate hike and now expect the FOMC to hold rates steady. Data from the top crypto prediction market platform Polymarket shows a 77% chance that the Fed will hold rates steady.

Meanwhile, there is only a 23% chance that the Fed will hike rates, down from a high of 70% as of last week. The sharp decline follows John Williams’ statement and the release of the soft PCE inflation data yesterday.