Williams Hints at One Final 2026 Rate Hike, Diverging From Traders

New York Fed President John Williams expects one more rate increase before the end of the year, he told Bloomberg News. Another hike may be appropriate, though he sees no reason now to expect further moves in 2027. That path still depends on incoming data. Williams expects overall inflation to run near the Federal Reserve target of 2% in 2027. Futures traders disagree: they price a 93% probability that rates end 2027 at least 50 basis points higher. The rate path could determine how much pressure interest rates continue to exert on crypto markets. Williams pointed to underlying inflation measures that have already cooled. The New York Fed measure of trend inflation is around 2.3%, and the Dallas Fed trimmed mean is at a similar level. Energy is still lifting inflation this year, but Williams said it may become a disinflationary force in 2027. He is watching AI-driven demand most closely as an inflation driver. Williams is also vice chair of the Federal Open Market Committee. Last month he said the Fed had no urgency to raise rates again. October hike probabilities fell from 70.9% to 47% within a day. Of the 18 officials who projected 2027 rates, eight expect a further hike beyond the increase expected this year. Beth Hammack of the Cleveland Fed and Lorie Logan of the Dallas Fed see more than one additional hike as necessary. CME FedWatch now puts the October hike probability at 23.8%. Traders expect the next move on Dec. 9, with an 89.8% probability of a hike. They expect tightening to continue well into 2027, with most of it priced for the first half. FedWatch shows 4% to 4.25% as the most likely January outcome, at 44.8%; 4.25% to 4.5% for March, at 43.6%; 4.5% to 4.75% for June, at 35.3%; and 4.5% to 4.75% for December, at 31.7%. The most likely range remains 4.5% to 4.75% from June through year-end, 75 basis points above current levels. A single quarter-point hike that leaves rates at 4% to 4.25% at the end of 2027 carries a 6.3% probability. BeInCrypto Markets puts Bitcoin at $83,453, down 0.18% over the past 24 hours. Bitcoin is about 34% below its all-time high of $126,080 reached on Oct. 6, 2025. Higher rates increase returns on cash and bonds, potentially drawing money away from Bitcoin, which pays no interest. The market-expected rate path would extend pressure on Bitcoin. Hike expectations have already lifted the US Dollar Index to an 18-month high. The 10-year Treasury yield touched 5.35% on Oct. 8, the highest level in 24 years. A pause after one more hike would limit the yield advantage of cash and bonds over Bitcoin sooner. Rate changes alone have not determined the direction of Bitcoin: Bitcoin rose 13% after the September hike as institutional funds bought Bitcoin again. Williams said he had no target in mind for the September Consumer Price Index reading. He said a lower reading would be preferable. A softer reading could reduce hike expectations and ease pressure on crypto markets. The CPI release is due Wednesday and is the last inflation reading before Oct. 28.