Governor Christopher J. Waller is making comments and traders are looking for anything additional to his ‘Reflections on Monetary Policy 2021‘ speech from last week that can give more clarity on the path ahead for 2022. 

Waller has been an advocate of rate hikes, but famously said, ”we are not in a Volcker kind of moment,” as he highlighted the difference between inflation that had been building for six of seven years compared to a surge in recent inflation that only began last year. 

Key comments

Inflation is too high, my job is to get it down.

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

Could put some downward pressure on labor markets.

Could pull back demand for labor and that would be a good thing.

 We are trying to get job market back to equilibrium; right now it’s out of whack.

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

Don’t need to tank economy to bring down inflation.

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

Do it now, front load it.

Market implications

The US dollar was choppy on Tuesday, stuck below the 20-year highs made at the start of the week as yields start to consolidate while investors await tomorrow’s April Consumer Price Index. The data could give further signs of inflation that may be starting to cool, following last Friday’s wage inflation data. Expectations are calling for a 8.1% annual increase compared to the 8.5% rise recorded in March.