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Fed’s Waller, unimpressed by inflation data, calls for two more rate hikes this year

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Federal Reserve Board Gov. Christopher Waller said Thursday he was not swayed by June’s benign consumer inflation data, and said he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.

“I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target,” Waller said in a speech to bond-market experts, known as The Money Marketeers of New York University.

That would bring the Fed’s benchmark rate to a range of 5.5%-5.75%.

Waller said that, while the cooling of CPI data for June was welcome news, “one data points does not make a trend.”

He noted that inflation slowed in the summer of 2021 before rocketing higher.

In his remarks, Waller said he is now more confident that the contagion from the collapse of Silicon Valley Bank in March will not create a significant problem for the economy.

“I see no reason why the first of those two hikes should not occur at our meeting later this month,” he said.

Traders in derivative markets have priced in high odds of a rate hike after the Fed’s meeting in two weeks. But traders have been skeptical the Fed will follow through with a second hike, even before the soft CPI data.

Waller said the timing of the second hike depends on the data.

“If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point hike should come sooner rather than later, but that decision is for the future,” he said.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.768%

has fallen to 3.77% this week after a lower-than-expected gain in jobs in the June report and the cooling of inflation. The yield had hit a recent high of 4.07% ahead of those softer reports.

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