Waller: A major change in financial conditions would occur if the AI bubble bursts or experiences a sharp correction.

BlockBeats reports that on July 14, Federal Reserve Governor Waller stated that if there is a significant correction in the market or a bubble burst in artificial intelligence (AI)-related assets, the financial environment will undergo "considerable changes."

Waller said he does not want the Federal Reserve to raise interest rates too early in order to avoid triggering a recession, but emphasized that they must not repeat the mistake of reacting too slowly to inflation as in 2021. He believes the current job market remains stable and there is "credible reason" to believe inflation can continue to decline without further policy tightening.

However, Waller warned that merely relying on market expectations for inflation to ease is not enough to justify the Federal Reserve remaining in a wait-and-see mode. If action is only taken after market confidence fades, the Federal Reserve may have to raise interest rates more aggressively to catch up with inflation. "We cannot afford to ignore inflation until it has completely disappeared," he said.