Fed Governor Waller said mortgage and auto loan rates are not low and expects
next month’s CPI and PPI to be at a “reasonable level.” He said the description
of “loose financial conditions” chiefly reflects equity prices and that rates
faced by ordinary Americans are not loose. Waller warned the U.S. cannot sustain
a 3% structural fiscal deficit; while this need not trigger a “cliff,” it could
push yields higher. He added fiscal pressures and AI-driven competition for
capital are lifting yields, and some studies show the Treasury term premium has
disappeared, which would also support higher yields.
