In his prepared remarks, Federal Reserve Governor Waller stated that at the most recent meeting, he supported the decision of the majority of FOMC members to maintain the current monetary policy. As he said in a speech a few weeks prior to the meeting, his reasoning was that previous communication by the Committee regarding a possible tightening of monetary policy had already prompted financial markets to price in some of the expected rate hikes. When such communication is clear and credible, what really matters is that those rate hikes are ultimately implemented, rather than having to raise rates at several consecutive meetings. However, if rate hikes are ultimately not implemented, the market will lower its expectations for rate hikes, and interest rates will immediately fall, thus easing monetary policy in an unfavorable way. Therefore, while the specific timing of rate hikes is not important, ensuring that previously promised rate hikes are implemented within a reasonable timeframe is crucial.
