Fed's Waller
- Long-term yields may have more of an inflation premium but Fed will fix that
- US deficits may also be driving long-term yields higher
- Some of ongoing services price inflation may represent lagged wage increases, which should ease
- Tremendous uncertainty around what will happen with tariffs
- Do not think 'draconian' tariffs will be implemented
- In the near-term do not think there will be a huge impact on inflation from tariffs
- Until Trump policies are clear, it will be hard for markets and the Fed to assess the next year
- Return to the lower bound does not seem likely any time soon
- Current rate are restrictive, though not tight enough to cause a recession
- The labor market is not behaving like an economy that's overheating
Waller is getting a bit wide of his lane here but it's useful to highlight the Fed's thinking.
