Federal Reserve Outlook on Interest Rates

(Reuters) – Federal Reserve Bank of New York President John Williams stated it will be appropriate for the central bank to reduce rates "over time" after September's significant half percentage point rate cut, in an interview published by the Financial Times on Tuesday.

Last week, Federal Reserve Chair Jerome Powell indicated that the bank would likely favor quarter-percentage-point interest rate cuts and mentioned that they were not "in a hurry" after new data boosted confidence in economic growth and consumer spending.

Williams, who has a permanent vote on the rate-setting Federal Open Market Committee, echoed Powell's sentiments, telling the FT that he does not view the September cut as a precedent for future actions.

"I personally expect that it will be appropriate again to bring interest rates down over time," he mentioned to the FT.

"Right now, I think monetary policy is well positioned for the outlook. If you look at the Summary of Economic Predictions projections that capture the totality of the views, it's a very good base case with an economy that’s continuing to grow and inflation returning to 2 percent."

On Friday, government data revealed an unexpectedly strong job market, raising doubts about widespread concerns regarding a weakening labor sector.

The payrolls report led to a repricing of near-term Fed rate cuts. Traders are now anticipating an 87% chance of a quarter-point rate cut next month, eliminating any expectation of a larger half-point cut, according to CME's FedWatch tool.