Federal Reserve Governor Christopher Waller said the U.S. regulator will likely have to continue raising rates. At the same time, new steps do not necessarily have to occur at every consecutive meeting. The main reason is inflation, which still remains too high relative to the Fed's target.
Why Waller is talking about further hikes
By his assessment, U.S. inflation has been above the target level for almost 5.5 years. Such a prolonged period of elevated inflation increases the risk that households and businesses will begin to perceive high price growth as the norm. This matters because inflation expectations directly affect wages, consumer decisions and companies' pricing policies.
What is weighing on inflation
Waller highlighted several factors. One of them is the construction of infrastructure related to the development of artificial intelligence. Such projects increase demand for energy, equipment, labor and capital. The second factor is ongoing shocks in the energy market. Rising energy prices can again amplify overall inflation and complicate the Fed's task.
What he said about the labor market
Despite weak September hiring data, Waller called the labor market resilient and stable. This means the regulator does not yet see sufficient deterioration in employment that would force it to abandon further policy tightening. He also assesses the economy in the second half of 2026 as strengthening.
Why pauses between hikes matter
The phrase that a rate hike should not occur at every meeting shifts the emphasis. This is not about abandoning further tightening, but about a more flexible pace. The Fed can take pauses, assess new data and then return to hiking if inflationary pressure persists. For the market, this means the cycle could stretch over a longer period.
How the dollar reacted
The currency market reaction was moderate. The DXY dollar index held around 102.30 after the speech. The speech did not trigger a strong impulse, since the hawkish stance of Fed officials is already partly priced into expectations. Nevertheless, the signal itself supports the scenario of a longer period of high rates.
What changed in the perception of the rhetoric
The speech was perceived as fairly hawkish. This reinforced expectations that the Fed is in no hurry to end its rate-hiking cycle. For markets, what matters is not only the next step itself, but also how long policy will remain restrictive. The longer high rates persist, the greater the pressure on gold, stock indices and other assets sensitive to the cost of money.
What's next
The main uncertainty now is tied not only to the level of the rate, but also to the schedule of future decisions. Each new release on inflation and the labor market can change expectations for upcoming meetings. Additional volatility may also be created by speeches from Fed officials, as the market will look for any hints about the timing of the next hike.
Do you trade the minute around Fed speeches?
Speeches by Fed officials can quickly move the dollar, gold and indices even without a previously known figure on the calendar. For a prop trader, the rules of the specific program matter here. In some cases, trades during important speeches are restricted, in others they are fully allowed, and leverage, the daily drawdown limit and slippage accounting rules can differ noticeably. Such conditions are best checked before opening a trade.