Federal Reserve officials have signaled a growing consensus that they can afford to pause and closely monitor incoming economic data before deciding on further interest rate hikes. This shift in sentiment was underscored by the September jobs report released by the Bureau of Labor Statistics, which showed a slowdown in monthly job growth, a slight increase in the unemployment rate, and modest wage gains—indications that the labor market remains stable but is far from overheating.

These developments led investors to significantly lower their expectations for a rate increase at the Fed’s upcoming meeting later this month. Just days before the midterm elections, market participants reduced the odds of a near-term rate hike from around 70 percent to approximately 20 percent. This reassessment came alongside announcements from the Group of Seven (G7) nations that they would release 100 million barrels of emergency crude oil and diesel supplies to alleviate rising fuel prices. Following the G7 news, global oil prices fell below $100 a barrel, easing one of the key inflationary pressures stemming from constrained Middle Eastern oil supply.

The past week marked a decisive shift in tone from Federal Reserve policymakers, who previously faced increasing pressure to act swiftly to contain inflation. New York Fed President John C. Williams, the vice chair of the Federal Open Market Committee (FOMC), stated on Tuesday that there was “no need for urgency” following the recent quarter-point increase. Two days later, Fed Vice Chair Philip N. Jefferson emphasized the importance of taking additional time to assess future moves, a view echoed by Michelle W. Bowman, the Fed’s vice chair for supervision. Bowman remarked on Thursday that she did not currently see an urgent need for further rate increases and advocated for caution in gauging how recent tightening would affect the economy.

Despite these remarks, the Fed’s official projections released last month still anticipate at least one more quarter-point increase before the end of the year. After the October meeting, the central bank will hold only one additional policy session in December. The trajectory of U.S. government bond yields will likely influence the pace of any subsequent hikes. Although bond yields eased somewhat on Friday, they remain considerably higher than earlier in the year.

Dallas Fed President Lorie D. Logan, a voting member of this year’s FOMC, noted that rising long-term yields could partially substitute for further rate hikes, depending on the underlying causes. If yields climb because investors expect additional Fed tightening to combat inflation, these moves do not reduce the need for policy action. However, if increased yields reflect a higher risk premium demanded by investors for holding longer-dated debt, this could slow economic activity and decrease the necessity for further monetary tightening. Logan cautioned, though, that the Fed would probably still need to raise rates by about half a percentage point in total to sufficiently restrain the economy and bring inflation back toward the 2 percent target.