SynopsisFed Governor Christopher Waller said the loss of the traditional safety premium on US Treasuries is pushing the neutral interest rate higher, potentially keeping borrowing costs elevated. He also warned that the US cannot simply grow its way out of its $40 trillion debt burden without bringing structural deficits closer to zero.

S. government debt, pushing the neutral level of interest rates higher, Federal Reserve Governor Christopher Waller told a Reuters NEXT Newsmaker event on Thursday.

S. fiscal situation, but also because of competition for capital from artificial intelligence infrastructure investment.

S. Treasury debt that had pushed bond prices up and held yields down had largely disappeared.

He cited recent research from Stanford Graduate School of Business finance professor Hanno Lustig showing this premium has been eroded over several years. S.

"" And that has been leading me ⁠to raise ‌my neutral rate estimate, which means higher policy rates for any given rate of inflation - maybe you're not as restrictive as you thought you were," he added. S.

central bank's next policy meeting. He added that he was inclined to be patient on interest rates and incoming data to confirm that price pressures are cooling, saying, " Give disinflation a chance."

818% on Wednesday, its highest since November 1, 2023.' S.

S. Treasury Secretary Scott Bessent has advocated, Waller said this was possible "if you can get the structural deficits down closer to zero."

S. budget deficit to 3% of GDP, along with 3% real GDP growth and increased energy production of 3 million barrels of oil per day.

S. 3% in fiscal 2024.

S. Supreme Court struck down President Donald Trump's tariffs under a broad emergency law.

Waller said that growing out of the debt through inflation, which is what happened after World War Two, is "not a good outcome" for making Americans better off in the current environment. Waller also dismissed the effectiveness of Bessent's move to double the size of bond buybacks for longer-dated Treasuries.

The first operation of at least $4 billion is due on September 10." I've never believed as an economist, not a policymaker, that these kind of short-run interventions do much," Waller said.