Fed's Waller says if war creates high inflation and weak labour market, could call for holding rates steady
Importance
Level 1
- The longer the war remains unresolved, inflation and job risks increase.
- High inflation and weak job market could be a challenge for the Fed. March headline PCE likely to hit 3.5% Y/Y.
- Possible energy price surge could have a lasting inflation impact.
- Markets appeared to have undervalued risk of extended conflict.
- Will be closely watching how inflation expectations react.
- If swift resolution to war, can look through price energy shock.
- After series of shocks, it gets harder to look through inflation jump.
- Will closely watch jobs data for mounting signs of stress.
- Job market breakeven rate is now likely around zero.
- Period of negative jobs growth might not signal recession.
- Changes to job market make it challenging to analyst now.