Fed Official Waller: Rise in Bond Yields Supports Tightening
Christopher Waller stated that the rise in bond yields affects interest-sensitive sectors, contributing to the Fed's monetary policy tightening goal.
Federal Reserve Board Governor Christopher Waller discussed the effects of recently rising bond yields on financial conditions and interest-sensitive sectors during remarks at the Bloomberg New Economy Forum held in New Delhi.
Impact of Bond Yields on Tightening
Federal Reserve Board Governor Christopher Waller stated at the Bloomberg New Economy Forum in New Delhi that the rise in yields will affect interest-sensitive sectors such as housing and automotive. Waller said that while higher yields are not the Fed's direct objective, they are doing a small part of the work.
The rise of bond yields in advanced economies to multi-year record levels has significantly tightened financial conditions.
Market Reactions and Rate Expectations
Market participants have revised their rate hike expectations downward in the face of rising bond yields. Rate hike expectations reflected in the swap markets of eight major economies have declined by approximately 200 basis points since mid-September.
Inflation and Future Steps
Waller stated in remarks last week that officials have flexibility regarding new rate hikes, but that additional increases will likely be needed to slow inflation. The Federal Open Market Committee decided to raise the benchmark interest rate last month.