Denting some of the recent enthusiasm seen after last week's CPI report, Federal Reserve Governor Christopher Waller called the 7.7% inflation print "enormous" and said it was "just one data point." Markets surged following the figure showing that inflation pressures were decelerating, with traders long awaiting any sign of moderating consumer prices. It's been nearly two years since the CPI figure was last at the Fed's targeted goal of 2%, but the most recent 7.7% number was the lowest level since January.
The transcript: "These rates are going to stay - keep going up - and they're going to stay high for a while until we see this inflation get down closer to our target," Waller told a UBS Group conference in Sydney. "We've still got a ways to go. This isn't ending in the next meeting or two. We're looking at moving in paces of potentially 50 [basis points] at the next meeting or the next meeting after that. We've got to see this continue because the worst thing you can do is stop [tightening conditions] and then it takes off again, and you're caught."
"The market seems to have gotten way out in front over this one CPI report. Everybody should just take a deep breath, calm down. We're going to see a continued run of this kind of behavior and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here. We've got a long, long way to go unless by some miracle incomes start dropping off very rapidly, which I don’t think anybody expects. Rates are going to keep going up and they are going to stay high for awhile until we see this inflation get down closer to our target."
Soft landing? "I've just been amazed to watch rates go up almost 400 basis points in about seven months, eight months and the markets haven't collapsed. We don’t have a financial crisis or anything along those lines. We've got to have a good level, and we got it there fast, and we didn’t break anything. We are certainly not breaking anything in the labor markets in terms of unemployment. Households are in good shape, and household balance sheets are in very good shape. I can't speak for [Fed] Chair [Jerome Powell], but as I watched the press conference, that was the signal – to quit paying attention to the pace and start paying attention to where the end point is going to be."