Hawkish Waller adds two-way risk for USD
TLT•Federal Reserve Governor Christopher Waller said he would support a December rate hike even if October inflation improves, and left open a 50-basis-point move if inflation is 0.3% or higher. The dollar and U.S. yields edged higher after his remarks, though a 25-basis-point hike remained the path of least resistance.
1. Waller backs December hike
Federal Reserve Governor Christopher Waller said he would support a December rate hike even if inflation improves in October. He also opened the door to a 50-basis-point move if inflation does not improve, defining that as a reading of 0.3% or higher.
2. Market reaction and outlook
The U.S. dollar and Treasury yields were a touch firmer after the remarks, but the market may struggle to support a 50-basis-point hike in December. Energy prices were down more than 20% from recent highs, with Brent crude below $90 a barrel, while moves in the Nasdaq indicated financial conditions had tightened since the last meeting. Waller’s comments added two-way risk for the dollar, but the path of least resistance still pointed to a 25-basis-point hike.
