Fed's Waller: Stubborn Inflation Requires Further Rate Hikes, Warns of Expectations De-anchoring

English summary

Federal Reserve Governor Christopher Waller spoke at the Istanbul Economic Forum, reviewing the policy logic from preventive rate cuts in 2025 to resumed hikes in 2026. He noted that inflation progress has stalled due to Middle East oil price spikes, AI infrastructure costs, and trade friction, stating current rates are insufficient to return inflation to the 2% target. Waller warned that de-anchoring inflation expectations is the primary risk and confirmed the Fed's 'signal-based communication' approach. Market pricing indicates an 85% probability of at least one more hike this year, with further tightening needed but flexible timing.