Williams says labor market isn't fueling inflation, but Fed tone stays hawkish
The New York Fed president's comment comes as Williams and Schlegel harden the case for more rate hikes and traders price in further tightening
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Federal Reserve Bank of New York President John Williams said the US labor market is not a source of inflationary pressure.
The comment stands apart from the broader tone at the Fed this week. Williams and Schlegel hardened the case for further rate increases in comments the same day. Fed Chair Powell said the central bank may need to raise rates again to curb inflation. Raphael Bostic has drawn a distinction between near-term and long-term inflation expectations, saying the short-run figures are encouraging but the long-term ones are not.
Money markets are pricing two to three more rate increases over the next year. Bond yields have climbed to multi-year highs as traders position for further tightening. The 10-year Treasury yield reached 5.17% on Thursday, and the 30-year yield hit its highest level since 2004 the same day. September's rate increase was the Fed's first since 2023.
Williams's view that labor is not driving prices sets him apart from colleagues who point to supply shocks and other sources of pressure. It does not change the trajectory the market has already priced in. For investors, the rate path implied by futures and yields still points toward further tightening, and his comment does nothing to shift that.