Federal Reserve Governor Waller said on the 8th that additional rate increases will likely be needed to bring inflation down to the Fed's 2% target. However, he said there is "flexibility" in the pace of hikes, leaving open the possibility that the Fed could hold off on raising rates at the October 27-28 meeting of the Federal Open Market Committee. According to the text of a speech delivered at a forum hosted by Turkey's central bank in Istanbul, Waller said, "If economic data continues to come in as expected, I expect we will need to raise rates further to return inflation to our 2% target sooner," adding, "Rate hikes do not need to be carried out at consecutive meetings, but should be done within a reasonable timeframe." His remarks echo views expressed by other Fed officials in recent days, suggesting the Fed will likely leave the federal funds rate target unchanged at its current 3.75% to 4% at the October FOMC meeting. In September, the Fed raised the federal funds rate target by 0.25 percentage point, and projections released at the same time showed most Fed officials expect another 0.25 percentage point increase by year-end. Investors currently expect the Fed to hold the federal funds rate steady at the October FOMC meeting but to raise rates at the December 8-9 FOMC meeting six weeks later.
Waller says further rate hikes may be needed to reach 2% inflation, implying the policy rate will rise further.
Expectations of additional Fed rate hikes push the 10-year Treasury yield higher.
