New York Fed President John Williams said Wednesday the recent surge in Treasury yields reflects a strong US economy rather than market strain, and he stopped short of committing to a rate hike. Traders have pushed the odds of a move at the Fed's Sept. 15-16 meeting to around 66%, and Wall Street is growing more nervous after fellow Fed official Warsh signaled openness to tightening.
Yields climb as the economy strengthens
Williams told CNBC that the jump in Treasury yields to multiyear highs is not a sign of market dysfunction. The move has been sharpest at the long end of the curve, where investors price in expectations for inflation and economic growth.
He said the driver is a strong US economy and outlook fueled by heavy investment in AI, data centers and technology, adding that the economy is affecting financial conditions rather than the other way around. Williams also said inflation expectations remain well anchored, despite this year's run-up in prices linked to tariffs and the Iran war.
Fed leaves the door open on a hike
Williams said he is still absorbing incoming data and has not committed either way on whether an interest rate hike is needed. According to CNBC: "I think that we have to wait and see," he told CNBC's Steve Liesman during a Squawk Box interview.
Traders raised the odds of a hike at the Fed's Sept. 15-16 meeting to around 66% Wednesday morning, according to the CME Group's FedWatch tool. As New York Fed president, Williams is a permanent voter on the Federal Open Market Committee.
Wall Street turns more cautious
Wall Street has grown more nervous about a rate hike, which now looks more likely after Fed official Warsh signaled a willingness to raise rates. Fed watchers see the upcoming jobs report and inflation data as key to the decision, according to MarketWatch. Williams, previously known as an advocate of the central bank's hold-and-wait approach, sounded more open to a hike in his Wednesday appearance.
Sources: CNBC, MarketWatch (snippet-based)
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