GBP/USD Rate Slides After Fed's Williams Pushes Back Against Rate Cut Bets

Above: File image of John C. Williams. Image: Brookings Institute, licensing conditions: CC 2.0.

The Dollar rebounded ahead of the weekend after a Federal Reserve Open Market Committee member said his colleagues must be prepared to raise interest rates again if required.

According to the Federal Reserve Bank of New York's Chair, John Williams, the Fed will remain data-dependent, and if the trend of easing inflation were to reverse, it would be ready to tighten policy again.

The market interpreted the comments as pushback against the rapid rise in market bets for Fed rate cuts in 2024.

The market has ramped up expectations for early cuts following the Fed's midweek policy update and guidance, where Fed Chair Jerome Powell said the central bank must guard against maintaining rates at restrictive levels for too long.

The market interpreted this and other parts of the guidance as condoning market expectations for rate cuts. The Dollar fell sharply in response, leaving it prone to a snapback on any contrarian commentary.

And this commentary has come from Williams, who told CNBC, "we aren't really talking about rate cuts".

"I just think it’s just premature to be even thinking about that," Williams said when asked about money market pricing for a rate cut in March.

The Pound to Dollar exchange rate is down nearly half a per cent on the day at 1.27 at the time of writing, the Euro to Dollar exchange rate has retreated by three-quarters of a per cent to 1.09.