Fed Governor Christopher Waller said a 50-basis-point rate hike should be considered if October core CPI rose 0.3% or more; it was confirmed at 0.3%. His remarks sent Treasury yields higher and markets began pricing in 75 basis points of further hikes, raising questions about the Fed's messaging under Chair Kevin Warsh.
Waller said a 50-basis-point hike next month should be on the table if October core CPI rose by at least 0.3%; the monthly increase was confirmed at 0.3%. His remarks triggered a sharp rise in U.S. bond yields. Markets shifted from expecting less than 50 basis points of hikes over the rest of the cycle to pricing in 75 basis points.
Waller had previously favored rate cuts, including saying in March that he would again advocate for cuts later in the year if the labor market remained weak. Other recent signals from Fed officials had pointed to gradual tightening. The article notes that the two-year Treasury yield rose 20 basis points on Tuesday, its biggest increase since April last year.
Warsh has argued that the Fed should focus on trends rather than isolated data points and has described debate among policymakers as a “family fight.” The article says that debate can become problematic when it produces muddled or contradictory signals for markets.
