Two top officials allied with Fed Chair Jerome Powell recently said they support further rate cuts, increasing the likelihood of a Federal Reserve interest rate cut next month, according to a report in Realtor.com.
New York Fed President John Williams, a permanent voter and important voice on the rate-setting Federal Open Market Committee (FOMC), said that he sees room for interest rates to fall “in the near term.”
San Francisco Fed President Mary Daly told the Wall Street Journal that she supports lowering interest rates at the next meeting. Daly is not a voting member of the FOMC, but she has rarely opposed Powell publicly. That suggests the Fed chair could seek a consensus in favor of cutting rates, the Journal said.
According to the Journal, the probability of a quarter-point rate cut in December immediately surged, rising from a roughly 50-50 toss-up early last week to around 85% on Tuesday.
The Journal reported, however, that divisions remain on the FOMC, with Boston Fed President Susan Collins and St. Louis Fed President Jeff Schmid both signaling that they likely will oppose a further rate cut this year. They cited fears of lingering inflation for their opposition, the Journal said.
The Federal Open Market Committee meets on Dec. 10
The Fed doesn’t set mortgage rates directly, but expectations about future Fed policy can influence those rates, the Journal said.
Average mortgage rates fell to a one-year low of 6.17% in late October, just after the Fed cut its policy rate for a second straight meeting, taking it to a range of 3.75% to 4%, the Journal reported.
The FOMC will next vote on rate policy on Dec. 10.
Speaking recently at a conference at the Central Bank of Chile, Williams offered the strongest endorsement yet for a December cut, and offered a possible window into Powell’s thinking ahead of the meeting.
“I view monetary policy as being modestly restrictive,” Williams said. “Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral.”
The Journal reported that yields on 10-year Treasury notes, a key indicator for mortgage rates, eased following Williams’ comments.
“It’s hard to think of something that would reverse the momentum toward a cut we’ve seen this week, but there are still over two weeks until the meeting, which can be an eternity in this uncertain macro environment,” Realtor.com Senior Economist Jake Krimmel said. “A few major FOMC voices would have to change their tune or some really troubling inflation/labor data would have to surface.”
