Williams of the New York Fed, Signaiza Corte in December and Focus on "Employment Risk" – Division in the Fed deepens

[Igor Pereira]

In a moment of paralysis and division in the Federal Reserve, the voice of John Williams, President of the New York Fed and Jerome Powell's right-hand man, carries a heavy weight. Today, Williams gave a clear signal that rekindles the chances of a interest cut at the meeting of December 9-10, contrary to recent narrative.

By Igor Pereira, Financial Market Analyst, Junior Member WallStreet NYSE

The market was pricing only 40% chance of cutting. Williams just put the market on high alert.

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1. Focus on Work Weakness (Our Alert Confirms)

Williams went straight to the point:

• "Low-for-job risks have increased", while inflation risks decreased.

• The labour market It's cold.

My Analysis (Igor Pereira): Williams is validating our macro thesis. He's looking at the data that the market ignored (negative job reviews, Jobless Claims on high) and seeing the same fissure in the real economy as us. Your concern for employment is the catalyst for the continuity of cuts.

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2. The December Signal: "Modestly Restrictive" Policy

Williams classified the current policy as "modestly restrictive" and explicitly said he sees "space for an additional short-term adjustment" to move politics towards a neutral stance.

My Analysis: In central bank language, "additional adjustment in the short term" with the December meeting to only weeks away is a Clear code for an interest cut. Williams is trying to forge the consensus Powell needs. He's telling Hawkish members that politics is too tight for the current state of the labor market.

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3. Inflation and Rates: Williams' Half Full Cup

Williams tried to minimize the risk of inflation:

• He believes that the underlying inflation continues to fall.

• He minimized the impact of tariffs, seeing them as a transitory effect, without "second-round effects".

• Their inflation forecast returning to 2% only in 2027 shows that the Fed has accepted higher inflation for longer.

My Analysis: Williams is willing to tolerate inflation above the target (CPI 3%) to avoid "deeper pains in the labour market". This is the definition of a EDF that prioritizes employment (and, by extension, asset markets) on the fight against inflation.

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Conclusion of Igor Pereira: The Fed Division is Our Edge

The division within the Fed has never been so public. We have Hawkish members concerned about inflation and Fed Number 2 Williams, focused on employment and signaling cuts.

What does that mean for us?

1. Maximum Uncertainty: The December meeting will be a battlefield. The probability of cutting will swing violently with each data.

2. Sales in the Dollar (USD): Williams' statements put pressure on the dollar because they revive the chances of lower income.

3. Buy in Gold (XAU/USD): A divided Fed, focused on employment and willing to tolerate inflation is the perfect environment for gold. If Williams can convince the committee to cut in December, we'll see a new high-level leg in the XAU.

Stay tuned for the next job data. They will be the final referee of this internal dispute.

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