NEW YORK (Reuters) – When New York Fed President John Williams talked about the need to “vaccinate the economy” on Thursday, markets listened. And when the New York Fed itself spoke up later to clarify his remarks, investors were again all ears.

In fact, as the U.S. central bank nears what is expected to be its first rate cut in a decade, global markets are hanging on to every clue about the upcoming decision to an unusual degree. Investors are trying to gauge whether policymakers are seriously worried about a sharp economic downturn or simply want to insure against that possibility.

One reason for investor confusion stands out. Fed Chair Jerome Powell has set the table for an interest-rate cut but has failed to win consensus why one is needed. Policymakers in recent weeks have sketched out rate-cut rationales ranging from bond market behavior to low inflation to the need to boost wages. When Williams, Powell’s No. 2 at the policy-setting table, appeared to provide some clarity, traders jumped on it.

U.S. stocks and bonds and futures contracts tied to the Fed’s policy rate rallied on Thursday, milliseconds after remarks from Williams that appeared to suggest an appetite for forceful rate cuts. The benchmark S&P 500 .SPX on Friday remained near the all-time high set earlier this week.

“It’s better to take preventative measures than to wait for disaster to unfold,” Williams said at an academic conference on Thursday. “Don’t keep your powder dry.”

Later in the day a New York Fed representative said Williams’ comments were “not about potential policy actions” at its upcoming rate-setting meeting, but academic in nature.

In the speech, Williams cited years of his own research. Stretching back at least five years as a policymaker he has repeatedly used similar phrasing to describe how the Fed should behave when interest rates are near zero.

But investors now are listening extremely closely.

Markets have long been expecting the Fed to cut rates at its July 30-31 meeting. Williams’ comments were read by some as not only endorsing that view, but suggesting the need for a deep, 50-basis-point cut.

Not even St. Louis Fed President James Bullard, the lone Fed policymaker who voted at the Fed’s June meeting for a rate cut, has gone that far. On Friday Bullard again said he supports a quarter-point cut.

Futures market odds of a 50-basis-point cut at the July meeting soared to 71% late Thursday immediately after Williams’ speech but fell to 23% on Friday, according to CME Group’s Fedwatch Tool.

(Graphic – Market bets on a 50 basis point Fed cut: tmsnrt.rs/32B9l6X)

President Donald Trump, who has repeatedly castigated the Fed for raising rates, also weighed in. “I like New York Fed President John Williams first statement much better than his second,” Trump tweeted Friday.

“His first statement is 100% correct in that the Fed ‘raised’ far too fast & too early,” Trump wrote as he again blamed the Fed’s rate hikes for holding back economic growth.

Williams has not said the Fed raised rates too fast or too early, and his record of remarks and policy votes shows he supported all of the central bank’s nine rate increases since 2015.

Fed policymakers, meanwhile, face the risk of disappointing markets if their communication is not pitch-perfect. Any selloff could worsen financial conditions and increase the risk of a bad outcome for the economy.

The New York Fed did not comment on the market reaction or the comments by Trump. Policymakers on Saturday enter a traditional “blackout” period before their upcoming meeting, during which they avoid making policy pronouncements of any kind.

“The Fed has been behind the curve for market pricing for about eight or nine months and they can go a long way to correcting the inverted curve by cutting 50 basis points,” said Gary Cloud, a portfolio manager of the Hennessy Equity and Income Fund. The problem, he said, is if the Fed is seen as “kowtowing to pressure by the president or that they know something negative about the direction of the economy that we don’t know.”

Given that Williams is vice chair of the Federal Open Market Committee, “one can appreciate” why market expectations shifted toward a 50 basis point cut, Mike O’Rourke, chief market strategist at JonesTrading, wrote in a note, adding that it is “alarming” that the Fed is having trouble communicating with markets.

“It is not a big deal when markets are at all-time highs, but the rest of the time it matters a very great deal,” O’Rourke said.

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