Fed: Now is the time to react with rate hikes — Loretta Mester

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Governor Christopher J. Waller is making comments and traders are looking for something in addition to his “Thoughts on Monetary Policy 2021” speech from last week that could provide more clarity on the way forward for 2022.

Waller has been a proponent of rate hikes, but famously said, “We’re not in a Volcker moment,” highlighting the difference between inflation that had been building for six or seven years compared to an increase in recent inflation that only started last year.

Key comments

Inflation is too high, my job is to lower it.

If we get help from supply chain resolution, that’s great, but we won’t count on that.

It could put some downward pressure on labor markets.

It could push back the demand for labor and that would be a good thing.

We are trying to bring the labor market back into balance; Right now it’s out of control.

We think we can raise interest rates and not have a big impact on unemployment.

It is not necessary to accumulate economy to reduce inflation.

This is the time to hit it with rate hikes, because the economy can take it.

Market implications

The US dollar was choppy on Tuesday, stuck below 20-year highs hit at the start of the week as yields begin to consolidate as investors await tomorrow’s April Consumer Price Index.

The data could give more signs of inflation that may be starting to cool down, following last Friday’s wage inflation data. Expectations point to an annual increase of 8.1% compared to the 8.5% rise registered in March

Source: Fx Street

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