(Bloomberg) -- The Federal Reserve Bank of New York boss moved markets Thursday, prompting traders to rush toward bets that the U.S. central bank will deliver a half-point interest-rate cut this month. Hours later, the New York Fed walked back his comments.

To Bank of America economist Michelle Meyer, it was a “debacle in communication,” one that’s convinced her the reduction will only be half as big.

Meyer, in a note titled “The 50bp head fake,” wrote that the central bank had no choice but to clarify New York Fed President John Williams’s comments. Williams had said that “it pays to act quickly” when the need for stimulus arises, causing short-end U.S. rates to sink, traders to price in a greater likelihood of a half-point cut than a quarter-point move, and Citigroup’s chief Group-of-10 currency strategist to reiterate his tactically bearish view on the dollar.

After the New York Fed later said the remarks were academic and not about possible action at the July 30-31 Federal Open Market Committee meeting, the dollar rallied and bets on aggressive Fed easing this month were pulled back.

“We suspect the FOMC was uncomfortable with the market moving toward a 50bp cut and wanted to push the market back to a 25bp baseline,” Meyer wrote. “In other words, Williams unintentionally misguided the markets.”

Meyer isn’t the only person who zeroed in on 25 basis points on Friday. St. Louis Fed President James Bullard said that’s the reduction he’d like to see this month. “It’s a committee decision and I’ll see what my colleagues have to say about this.”

(Updates with James Bullard’s comment in final paragraph.)

--With assistance from Matthew Boesler.

To contact the reporter on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Nick Baker

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