In August, the U.S. labor market continued to weaken and employment fell short of expectations. Williams said the Fed had made "significant progress" toward its goals of maintaining price stability and achieving maximum employment, and it was appropriate to lower the federal funds rate now. Market expectations have increased for the Federal Reserve to cut interest rates by 50 basis points this month, but Williams did not express any intention to cut interest rates by 50 basis points this month.

A rate cut this month is almost certain, but how much is still controversial. Market expectations for a sharp 50 basis point rate cut by the Federal Reserve this month have increased.

In August, the U.S. labor market continued to weaken, and employment fell short of expectations. On September 6, the U.S. Bureau of Labor Statistics released a report showing that U.S. nonfarm payrolls increased by 142,000 in August, less than the expected 165,000. The July data was revised down significantly from 114,000 to 89,000.

Fed's third-in-command Williams said after the data was released:

The Fed has made "significant progress" on its two goals of maintaining price stability and achieving maximum employment, and risks to both goals have reached a "balanced" state. With the inflation rate gradually moving towards the 2% target, it is appropriate to lower the federal funds rate now.

Traders predict that the probability of the Federal Reserve cutting interest rates by 50 basis points this month has risen from 36% before the data release to about 50% now. At the same time, the market predicts that the full-year interest rate cut in 2024 will be about 115 basis points, higher than the previous forecast of 108 basis points.

Williams expects the Fed to cut interest rates to around 2.25% this year and close to 2% next year.

It is important to note that Williams did not express any intention to cut interest rates by 50 basis points this month. Nick Timiraos of the New Fed News Agency said:

Fed's Williams' prepared remarks did not lay any groundwork for a 50bp rate cut. Policy could move to a more neutral setting over time. He's doing the Q&A now, and if the questioners decide to ask about monetary policy instead of Treasury management, maybe we'll get more information.

Nick Timiraos, the “Fed Mouthpiece” said:

The non-farm payrolls report has the potential to provide a clear signal about the size of the Fed's first rate cut, whether it is 25 basis points or 50 basis points, the market pricing will immediately rise to 90%. But this non-farm payrolls report did not solve this problem very well, and the market is currently pricing in a 25 or 50 basis point rate cut. The overall non-farm data is not bad enough to change the baseline expectation to a 50 basis point rate cut, but considering the revised data, it is not convincing enough to completely dispel speculation about a larger rate cut.