Fed's John Williams Says There Is 'No Need for Urgency' on the Next Rate Hike: What It Means for Savers and Borrowers

One of the Federal Reserve's most influential officials signaled patience, which could shape what you earn on savings and pay on loans in the months ahead.

John Williams, president of the Federal Reserve Bank of New York, said on Tuesday, September 29, that the Fed does not need to hurry its next interest rate increase. Speaking at the University at Buffalo, he said, "With the policy action we took at our September meeting, there is no need for urgency."

Williams also said that "one further upward adjustment of the federal funds target range may be appropriate late this year" if the economy develops the way he expects. He stressed that this was his own view and would depend on new data.

Where interest rates stand now

The Federal Reserve, often called the Fed, is the nation's central bank. One of its main tools is the federal funds rate, which is the interest rate banks charge each other for overnight loans. When the Fed moves this rate, many other rates in the economy tend to follow.

At its September meeting, the Fed raised its target range by a quarter of a percentage point to 3.75% to 4%. In his speech, Williams explained why: "At 3.7 percent, inflation is unquestionably too high." Inflation means prices rising over time, and the Fed's long-run goal is 2%. (A government report released the next day, on September 30, put the Fed's preferred inflation measure at 3.4% for August, after annual revisions to earlier data.)

Williams named three forces pushing prices up: tariffs, which are taxes on imported goods; supply-chain problems along with higher energy and commodity prices; and strong demand tied to artificial intelligence spending.

Why his words matter

Williams is a permanent voting member of the Fed's rate-setting committee, so investors pay close attention to what he says. According to Reuters, futures markets, where traders bet on future rate moves, had been pricing in a strong chance of a rate hike at the Fed's October meeting. His "no urgency" message suggested the Fed may take its time.

Not every Fed official sounded as relaxed. Also on September 29, Chicago Fed President Austan Goolsbee warned about how long prices have been rising faster than the Fed wants. "The fact we have been 5-1/2 years above inflation target is playing with fire," he said, according to Reuters.

Williams also shared a hopeful outlook. He said he expects inflation to "slow to just above 2 percent next year, then reach our longer-run inflation goal of 2 percent in 2028." He said real GDP, a measure of the economy's total output after adjusting for inflation, has been growing at about 2% for the past year, and that layoff rates are "near historic lows nationwide."

What this means for your wallet

The Fed does not set the rate on your credit card or savings account directly, but its decisions tend to ripple out. Here is how a patient Fed could affect you:

• Savings accounts and CDs: Rates on high-yield savings accounts and certificates of deposit (CDs), which are savings accounts that lock your money up for a set time in exchange for a set rate, often move with the Fed. With rates higher after the September increase, savers may be able to earn more than they could a year ago. It may be worth comparing what your bank pays with other options.
• Credit cards: Most credit cards have variable rates that follow the Fed's moves. The September increase could already be showing up on statements. Paying down card balances may help limit the extra interest.
• Mortgages: Mortgage rates are shaped more by longer-term bond yields than by the Fed's overnight rate, but Fed signals can still move them. If you are shopping for a home, comparing several lenders may help.
• Retirees on fixed incomes: Higher inflation can shrink what a fixed income buys. At the same time, higher savings rates may help cash reserves earn a little more.

Fed officials often say different things, and plans can change quickly as new data comes in. A single speech is a clue, not a promise.