Fed’s Williams Says Another 2026 Rate Hike Is “Reasonable,” but Refuses to Lock In October

New York Fed President John Williams indicated that another interest-rate hike before the end of 2026 is a “reasonable” expectation, reinforcing the view that September’s increase might not be the central bank’s final move this year. Speaking at the London Macro Policy Forum, Williams acknowledged that market participants currently view another hike this year as likely, calling it a reasonable way to frame the outlook. However, he explicitly declined to endorse an October move, emphasizing that policymakers must first gather and evaluate incoming data, much as they did between July and September. This cautious stance comes as Fed funds futures assign a 77.5% probability to an October rate hike, a sharp rise from roughly 53% the previous day.

Williams also underscored the Federal Reserve’s pivot away from explicit policy signaling, declaring that the era of forward guidance is “over.” Instead of pre-committing to future actions, officials will let economic data dictate whether and when further tightening is necessary. This data-dependent approach aligns closely with the communication style of Federal Reserve Chair Kevin Warsh, following this month’s 25 basis point rate increase that brought the target range to 3.75–4.00%. Williams pointed out that September’s decision was driven by a cumulative build-up of economic pressures rather than a single data point, suggesting the bar for another hike will depend on how inflation, growth, and labor market conditions evolve in the coming weeks.

With inflation remaining the central concern, Williams labeled it the “big challenge” for the Fed, stressing the need to restore price stability to 2% “in a timely manner.” He noted that both the US and global economies have demonstrated resilience against rising energy prices, which reduces the immediate growth trade-off associated with further monetary tightening. While his comments bolster the case for at least one more hike in 2026, they stop short of validating the aggressive market pricing for an October adjustment. The upcoming employment and inflation reports will be pivotal in determining whether the year-end rate expectation materializes into consecutive moves next month.

Key Takeaways

• New York Fed President John Williams stated that another rate hike before the end of 2026 would be a “reasonable” expectation.
• He declined to commit to an October hike, reiterating that the Fed must assess incoming data before finalizing timing decisions.
• Market expectations have shifted ahead of Williams, with October hike odds climbing to approximately 77.5%, up significantly from the prior day.
• Williams declared that explicit forward guidance is “over,” cementing the Fed’s shift toward a meeting-by-meeting, data-driven strategy.
• He explained that September’s hike followed a build-up of pressures rather than a single data release, indicating a similar evidence-based approach will guide future decisions.
• Inflation remains the primary focus, with Williams calling it the “big challenge” and emphasizing the need to return inflation to 2% “in a timely manner.”
• His remarks support the prospect of another 2026 hike, but do not confirm the market’s aggressive assumption that a move is locked in for October.

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