Fed Waller
  • Fed needs to maintain flexibility for June meeting
  • Prudent risk management may suggest skipping a hike in June and leaning toward July
  • Does not expect data in next couple of months to make it clear terminal interest rate has been reached
  • Says he does not support stop hikes unless there is clear evidence that inflation is moving down to 2% target
  • More loosening of 'very tight' labor market needs to be see to help take heat off high inflation
  • He is concerned about the lack of progress on inflation
  • Concerned inflation won't come down much unless growth of average hourly wages nears 3%
  • April PCE and May CPI data will be critical
  • Cites falling temp-help employment as a sign of job market loosening
  • Core goods prices aren't slowing or retreating as much as we need to get inflation down closer to our 2 percent targe
  • Most recently, a rebound in the housing market is raising questions about how sustained lower rent increases will be
  • Full speech

The April PCE report is due on Friday while the May CPI report is due June 13, just one day before the FOMC decision.

The odds of a June hike were relatively stable at near 30% on these comments, which aren't a big surprise given his hawkish leanings. The idea of skipping June and hiking in July may be one the market starts to flirt with more meaningfully. That said, the July meeting is already better than 50/50.

The problem with June is that Powell doesn't like waiting until the day before the meeting to make up his mind so watching the May CPI number might not be an option unless it's an upside surprise like today's UK data.

Key line:

Let me cut to the chase—in my view, data since the last meeting of the Federal Open Market Committee (FOMC) has not provided sufficient clarity as to what we should do with our policy rate at the next meeting. We still have some major data releases coming up in the next three weeks and I'll also be learning more about evolving credit conditions, both factors which will inform me on the best course of action. Between now and then, we need to maintain flexibility on the best decision to take in June.