Waller: Safe Treasuries premium eroded, lifting the neutral rate

Federal Reserve Governor Christopher Waller said the safety premium on U.S. Treasuries has largely disappeared, pushing up his estimate of the neutral interest rate and implying higher policy rates for any given inflation. He cited rising yields amid concerns about the fiscal outlook and competition for capital from AI infrastructure, and argued that reducing the roughly $40 trillion debt would require structural deficits near zero percent of GDP. Waller downplayed bond buybacks as a tool, and suggested he’d be patient about rate moves and potentially hold rates steady if inflation cools; Treasury yields moved lower on the remarks.