Waller says higher long-term yields are doing part of the Fed’s work for it

Federal Reserve Governor Christopher Waller said on Tuesday that US inflation expectations are well anchored, Reuters reported². He also said that rising long-term US Treasury yields are affecting interest-sensitive sectors of the economy, and that higher yields are “doing a little bit of the work” of tighter monetary policy^4,5. Waller spoke in New Delhi on Oct. 13¹.

In the same set of remarks he said there is a certain threat to the Fed’s independence from the administration, while adding that he has faith in Congress and the courts to protect that independence^6,7. No immediate reaction was seen in the US dollar following the remarks⁶. Waller, a member of the Board of Governors, also spoke on monetary policy in the age of artificial intelligence³.

The remarks were delivered as officials prepare for September inflation data, with Waller appearing alongside other Fed speakers this week^4,5. Reuters framed the anchoring comment as his central message of the day².

Why it matters to investors

The anchoring judgment matters because of where policy already stands: the Fed raised rates last month, and Waller had recently said further increases were likely². If long yields are doing part of the tightening, the case for the central bank adding to its own moves is weaker than it was, which is the link he drew explicitly^4,5.

Waller’s view is one vote among several being heard this week, alongside Richmond’s Thomas Barkin and Boston’s Susan Collins⁴. Bloomberg reported that Waller, like Blackstone’s Gray, sees a warning in France’s fiscal stress, which places his comfort on expectations next to a concern about sovereign bond markets¹.

What to watch

The first thing to watch is whether other officials adopt the argument that the bond market is substituting for policy, since that is the mechanism by which a yield move becomes a reason not to hike^4,5. The second is the independence question, which Waller raised himself and tied to Congress and the courts rather than to the Fed’s own defences^6,7.

Note what these accounts do not contain: Waller did not, in this reporting, give a rate preference for the next meeting^2,3. The market’s own reading was muted, with the dollar showing no immediate move⁶.

Also worth watching is how the France comparison develops, since Bloomberg reported it as a shared concern between a Fed governor and one of the largest private asset managers rather than as a Fed forecast¹.