More from Waller: Some of ongoing services inflation may represent lagged wage increases

• Long-term yields may have more of an inflation premium but Fed will fix that
• US deficits may also be driving long-term yields higher
• Some of ongoing services price inflation may represent lagged wage increases, which should ease
• Tremendous uncertainty around what will happen with tariffs
• Do not think ‘draconian’ tariffs will be implemented
• In the near-term do not think there will be a huge impact on inflation from tariffs
• Until Trump policies are clear, it will be hard for markets and the Fed to assess the next year
• Return to the lower bound does not seem likely any time soon
• Current rate are restrictive, though not tight enough to cause a recession
• The labor market is not behaving like an economy that’s overheating

Waller is getting a bit wide of his lane here but it’s useful to highlight the Fed’s thinking.

This article was written by Adam Button at www.forexlive.com.