Fed's Waller Says Rate Hikes Haven't 'Broken Anything' So Far — But SPY, BND Tell A Different Story

Federal Reserve Governor Christopher Waller is convinced the U.S. central bank is on the right path because its rate increases, so far, have not "broken anything."

"For all the talk of crashing the economy and breaking the financial markets. It hasn't done that," Waller said at an economic conference organized by UBS in Australia, according to a report by Reuters.

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Stocks and bonds, however, have taken a hit this year due to those moves. The SPDR S&P 500 ETF Trust SPY is down over 16% so far this year, while the Vanguard Total Bond Market Index Fund ETF BND has shed 15%. The Invesco NASDAQ 100 ETF QQQM has lost over 28%.

No Softening: The Fed may reckon to slow the pace of rate hikes at its next meeting, but that should not be seen as a "softening" to bring down inflation, Waller said.

"We're at a point we can start thinking maybe of going to a slower pace," Waller said, adding that "we're not softening ... quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a way out there,” Waller said.

According to him, a 7.7% annualized increase in inflation recorded in October is still "enormous" and if the central bank scaled back from three-quarter point increases to a half-point increase at its next meeting, "you're still going up."

"We're going to need to see a continued run of this kind of behavior and inflation slowly starting to come down before we really start thinking about taking our foot off the brakes," Waller said.

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