New York Federal Reserve President John Williams said Thursday it would be reasonable to see another interest rate hike by the end of 2026, adding his voice to a growing chorus of Fed officials who believe further tightening is needed to bring inflation back to target.
Speaking at a conference in London organized by the National Institute of Economic and Social Research, Williams said market participants forecasts suggesting another rate hike may be appropriate reflect a reasonable way of thinking about it. He added that the Fed will need to observe incoming data and follow a similar approach to the period between July and September.
His comments came as CME Group FedWatch tool put the probability of an October rate hike at 77.5 percent on Thursday, up sharply from around 53 percent on Wednesday. The shift followed a wave of hawkish signals from multiple policymakers throughout the week.
Federal Reserve Governor Michael Barr told a housing conference in Chicago on Wednesday that risks to achieving our inflation target have increased, while risks to the labor market have receded. In his base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion, he said, according to NBC News.
Boston Fed President Susan Collins backed the September quarter-point increase and warned that the likelihood of inflation remaining well above the 2 percent target is increasing, according to Briefs.co. Earlier in the week, St. Louis Fed President Alberto Musalem told Reuters that additional rate increases may be needed to quell inflation resulting from strong demand and a commodity price shock that has moved beyond oil.
The hawkish repricing rattled bond markets. The yield on the 10-year Treasury note rose to 5.13 percent, its highest level since 2007, in what Dow Jones data showed was its sharpest one-day jump since April 2025. The 30-year Treasury yield climbed to 5.44 percent, a level not seen since 2004. The average 30-year fixed mortgage rate jumped to 7.26 percent, the highest point of President Donald Trump second term, according to Mortgage News Daily.
The rate expectations shift was fueled in part by the S&P Global flash Purchasing Managers Index for September, which showed the U.S. composite reading surging to 58.4, the highest in over five years. Services rose to 58.7 and manufacturing to 57.0, both beating forecasts. Chris Williamson, chief business economist at S&P Global Market Intelligence, said businesses are clearly experiencing a boom with input costs jumping at the steepest rate in four years as fuel and transport costs spike.
The broader selloff extended globally, with Japanese Government Bond yields hitting their highest levels since 1996. Sixteen of the eighteen FOMC policymakers projected at least one more rate hike before year-end at the September meeting, underscoring how far the committee center of gravity has shifted toward continued tightening.
Sources
- [CNBC](cnbc.com), Fed Williams says another rate hike by year-end is reasonable, September 24, 2026
- [NBC News](nbcnews.com), Treasury yields surge to near 20-year high, September 24, 2026
- [RealtyWire](realtywire.com), Fed Barr Says More Rate Increases Are Likely, September 23, 2026
- [Briefs.co](briefs.co), Boston Fed Collins Backs Hike Warns on Inflation, September 22, 2026
- [Reuters via Investing.com](ca.investing.com), Fed Musalem says more rate hikes likely needed, September 21, 2026
