Fed's Waller: High inflation makes me favour faster QE taper, faster rate lift-off

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 a faster pace of QE taper and sooner rate lift-off, according to Reuters. Inflationary pressures are becoming more widespread, Waller continued 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. Nonetheless, 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.   

Market Reaction

Waller's comments are the most hawkish yet from a core Fed member (i.e. a member of the permanent voting Board of Governors). But for now, FX markets are not seeing any reaction. Fed Vice Chari Richard Clarida is scheduled to speak later in the session. If his remarks follow a similarly hawkish tone, that would be more likely to provoke USD strength.