Federal Reserve Governor Christopher Waller, in a speech delivered in London on Wednesday, proposed that the central bank could afford to delay interest rate hikes while monitoring the effectiveness of its anti-inflation efforts. Waller emphasized the importance of analyzing recent data to determine if these measures are successfully reducing demand and slowing inflation or if a resilient economy continues to drive up prices.
Waller’s remarks come ahead of Jerome Powell’s anticipated New York policy speech, which is expected to provide more detailed insights into future financial policies. This comes at a time when several Fed officials have suggested that rising Treasury yields, especially the 10-year yield reaching 4.9% – a level not seen since 2007, indicate tightening financial conditions that may make further rate hikes unnecessary.
In his speech, Waller acknowledged the surge in Treasury yield and highlighted recent economic indicators, including a consumer price index at 3.1% and a personal consumption expenditures price index at 2%, as signs of promising developments in inflation control.
However, Waller also expressed concern about escalating housing services prices and persistent inflation. He cautioned that continued strong economic performance coupled with enduring inflation might necessitate additional policy tightening measures. He pledged to closely monitor any unexpected surge in core inflation, which could be driven by robust spending and investment or a moderation due to falling demand and a cooling real economy.
The Federal Open Market Committee (FOMC) is scheduled for its next discussion on October 31-November 1, where these issues are likely to be further examined.
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