Federal Reserve Board Governor Christopher Waller remains unfazed by June’s benign consumer inflation data and is pushing for two more 25-basis-point rate hikes this year. Speaking at a gathering of bond-market experts known as The Money Marketeers of New York University, Waller stressed the importance of these hikes in keeping inflation on target.
While Waller acknowledged June’s cooling CPI data as good news, he cautioned against drawing hasty conclusions from a single data point. He reminded listeners that inflation had previously decelerated in the summer of 2021 before experiencing a sharp increase.
Addressing concerns about the economic fallout from the collapse of Silicon Valley Bank, Waller expressed his confidence that the impact would not be significant. He furthermore suggested that the first rate hike could take place this month.
Derivative market traders have already priced in a high probability of a rate hike after the upcoming Fed meeting. However, they are less convinced about a second hike, even before considering the soft CPI data.
According to Waller, the timing of the second rate hike will depend on future economic data. If inflation fails to show progress and there are no signs of a significant economic slowdown, the second hike will likely be implemented sooner rather than later.
Following a lower-than-expected rise in jobs for June and the easing of inflation, the yield on the 10-year Treasury note has fallen to 3.77% this week. This is a decline from the recent peak of 4.07% recorded prior to the release of the softer economic reports.