Fed's Waller signals further rate hikes as inflation stalls, AI costs weigh

Fed Governor Christopher Waller indicated that additional rate hikes may be necessary if inflation remains stubborn and the labor market stays strong, citing rising high-tech costs from massive AI investments as a factor stalling progress toward the 2% target. This marks a hawkish shift from prior guidance, suggesting the Fed may prioritize inflation control over growth. The market impact is direct: higher-for-longer rates pressure equities and bonds, with the dollar likely to strengthen.