Fed’s Waller Favours Faster Taper, Faster Rate Hike

Federal Reserve Board of Governors member Christopher Waller said on Friday that the rapid improvement seen in the labour market and high inflation makes him favour faster taper and sooner rate increase.

Inflationary pressures are becoming more extensive, and will last longer into 2022 than expected. Waller added that the labour market is rapidly approaching full employment and that supply chain disruptions were having a larger and more persistent effect on the economy.

Waller said he expects growth in Q4 2021 and Q1 2022 to be “robust”. Finally, Waller said that he would support a reduction in the balance sheet, which he thinks might help smooth market functioning, and would support a similar process of balance sheet reduction to last time.

Waller’s comments are the most hawkish from a core Fed member. But for now, Forex markets are not seeing any reaction.

Fed Vice Chari Richard Clarida is scheduled to speak later in the US session. If his remarks are similarly hawkish, that would push the USD strength upwards.