The Federal Reserve has had a rough two days of communicating its policy to the public, risking confusing market participants ahead of a critical July 31 meeting where the central bank could deliver the first interest rate cut in over 10 years.

On Thursday, New York Fed President John Williams had markets dancing after he made remarks comparing easing monetary policy to getting a vaccination, saying it “pays to act quickly to lower rates at the first sign of economic distress.” His remarks were focused on how monetary policy decisions are different when interest rates are close to zero (the Federal funds rate is currently in a target range of 2.25% to 2.5%).

“It’s better to take preventative measures than to wait for disaster to unfold,” Williams said.

Investors interpreted his remarks as signaling a more dramatic interest rate cut in the next Federal Open Market Committee meeting on July 31. Bets on a 50 basis point rate cut surged in Fed funds futures markets, and the New York Fed followed up with an unusual clarification on Williams’s speech.

“This was an academic speech on 20 years of research,” a New York Fed spokesperson said in a statement sent to reporters. “It was not about potential policy actions at the upcoming FOMC meeting.”

On Friday, St. Louis Fed President James Bullard (a voting member of this year’s FOMC) said he was sitting front row at that speech and sided with the clarification.

“My interpretation was that he was talking about his past research,” Bullard said.

Starting Saturday the Federal Reserve’s policymakers will stop making public remarks ahead of the July 31 meeting, as part of the normal “blackout” protocol that precedes FOMC meetings.

Misread or misspeak?

After Williams’s remarks, Fed funds futures contracts raised the odds of a 50 basis point rate cut to about 60%, with a 40% chance of a 25 basis point cut. Williams’s remarks came alongside commentary from Fed Vice Chairman Richard Clarida saying that the Fed doesn’t “have to wait until things get so bad to have a dramatic series of rate cuts.”

When the New York Fed issued its clarification, the odds of a 50 basis point cut came back down to 22.5%.

Bank of America Merrill Lynch described the Fedspeak as a “head fake.”

“In other words, Williams unintentionally misguided the markets,” Bank of America’s Michelle Meyer wrote. “We believe the NY Fed had no other choice but to issue a press release given that the Fed’s blackout period starts on July 20th.”

But the comments caught the attention of President Donald Trump, who said Williams’s remarks were “100% correct in that the Fed ‘raised’ far too fast & too early.”