Waller's Hawkish Speech Sparks Rate Hike Expectations

Wall Street is abuzz after Federal Reserve Chairman Waller's speech at the Jackson Hole annual meeting on Friday, which was widely interpreted as a 'hawkish correction' to the communication following the July FOMC meeting.

Waller reaffirmed that the 2% inflation target of the Federal Reserve remains unwavering, stating that current overall financial conditions cannot be deemed restrictive. He also bluntly stated that if he cannot be confident that inflation is falling at a 'clear and sufficiently fast' pace, the Federal Reserve 'still has work to do.'

Waller's speech quickly shifted Wall Street's focus on the September FOMC meeting, with investors like Priya Misra from JPMorgan Asset Management calling it a 'hawkish speech.' Misra believes that Waller was strongly reaffirming the Fed's commitment to price stability and viewing it as a 'cleanup' of the communication 'misstep' from the July press conference.

Both Barclays and Société Générale adjusted their forecasts for Federal Reserve policy based on Waller's speech, expecting the Fed to raise rates by 25 basis points in both September and December. Société Générale also anticipated another rate hike in March.