Recent public remarks by New York Fed President John Williams have dampened the recently heating expectations for an October rate hike. As a key member of the Fed's core decision-making body and Vice Chair of the Federal Open Market Committee, his latest statements have directly influenced market interest rate pricing.

Speaking in Buffalo, New York, Williams made it clear that following September's rate adjustment, monetary policymakers currently see no urgency to take further action. He emphasized that decision-makers need more time to observe evolving economic data to more accurately assess the economy's underlying trajectory and the risks to achieving policy goals, thereby charting an appropriate course for monetary policy.

Looking ahead on the interest rate path, Williams expects the Fed to make one more rate adjustment before the end of the year to ensure inflation returns to the 2% target at a sustainable pace. Markets widely interpret this remark as pointing to December rather than the upcoming October Federal Open Market Committee meeting. Following his comments, traders' bets on an October hike cooled rapidly, with the implied probability dropping from around 70% on Monday to roughly 50%. This outlook also aligns closely with the median projection previously released by the committee.

Regarding the inflation outlook, Williams set this year's inflation forecast at 3.5%. Notably, he highlighted two new factors currently driving up prices. First, demand shocks related to artificial intelligence are exerting an increasingly pronounced upward pressure on inflation. Second, the inflationary impact of energy prices has not only exceeded previous estimates but is also expected to persist for a longer period. This stands in stark contrast to his optimistic outlook earlier this spring, when he anticipated falling oil prices and a natural easing of inflationary pressures.