NY Fed clarifies Williams speech that market took as signal of a rate cut

When New York Federal Reserve President John Williams said central bankers need to “act quickly” as economic growth slows, a spokesperson said he was drawing from research, not hinting at what may happen at this month’s Federal Open Market Committee meeting.

“This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting,” a spokesperson for the New York Federal Reserve told CNBC.

Earlier, Williams delivered a speech at the annual meeting of the Central Bank Research Association in which he said, “It’s better to take preventative measures than to wait for disaster to unfold.”

His comments come as Wall Street expects the U.S. central bank to cut its benchmark interest rate during the July 30-31 meeting.

After Williams’ earlier remarks, market expectations for a 50 basis point rate cut leaped to about 59%, according to the CME’s Fedwatch tool. Prior to his speech, predictions for a half-point cut had hovered between 20% to 30%.

Later, Fed Vice Chair Richard Clarida said on Fox Business News that cutting interest rates quickly is a good strategy. Market expectations for a half-point cut surged even higher to about 69%.

But after the New York Fed spokesperson clarified Williams comments, expectations for a 50 basis point cut fell to about 50% around 7 p.m. Eastern time.

The Fed currently pegs the overnight funds rate in a range between 2.25% and 2.5% — above zero, but still well below normal levels that have prevailed during past economic expansions.

— CNBC’s Fred Imbert and Patti Domm contributed to this report.