Fed’s Williams warns inflation to stay above 3% in coming months

John Williams of the Fed says inflation will be “well above” 3% in the coming months. The chance of the Fed cutting rates by April sits at 15%, down from 30% last week.

Williams’ comments have traders reassessing the odds of a rate cut. The Fed rate decisions market now shows a 15% probability that the Fed will cut rates in April, down from 30% last week when traders priced in higher chances of a cut. Williams pointed to persistent inflationary pressures and suggested a “higher for longer” policy stance, which has pushed expectations for near-term easing lower.

The April rate decisions market is thin, with no volume recorded in the past 24 hours. Even small trades could move the odds meaningfully. With 14 days left until resolution, new data or statements from Fed officials could cause further volatility. The depth to move the market by 5 percentage points is low, so it wouldn’t take much to shift the current pricing.

For traders betting on a rate cut, buying YES shares at 15¢ could yield a 6.67x return if the Fed does cut rates. Given Williams’ comments and the current economic climate, though, this is a long shot unless new dovish signals emerge.

Watch for upcoming speeches by Fed Chair Jerome Powell or any surprise inflation data releases. Any deviation from the current “higher for longer” narrative could shift expectations quickly.

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