Fed Governor Waller says additional rate hikes likely needed to reach 2% inflation, but there is 'flexibility' on pace
What happened
Fed Governor Christopher Waller said on Thursday, October 8, that additional interest rate hikes will likely be needed to bring inflation down to the Fed's 2% target, though he added there was 'flexibility' about the pace, according to Reuters. The remarks reinforce the message from the September FOMC minutes released October 7, which showed most policymakers in September saw more interest rate rises ahead, with markets now pricing three more hikes over the coming year starting in December. Treasury Secretary Scott Bessent has downplayed the bond moves as global rather than US-specific, but the 10-year term premium — the extra compensation investors demand beyond expected Fed rates — has risen to its highest in 12 years.
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Start your free 14-day trialWho’s affected
- Broad market / rate-sensitive sectors: negative — reinforces the higher-for-longer pricing that has pressured stocks and pushed long-dated yields to 24-year highs; housing, small caps (Russell 2000 -1.3% Wednesday), and high-multiple growth names are most exposed. Treasury bonds: modest negative — supports term-premium and front-end rate repricing. Banks/financials: potentially positive — higher rates widen net interest margins. Gold/precious metals: negative — already sliding below $4,100 on firm dollar and hike bets.