Chris Waller’s campaign for Fed Chair is increasingly looking like it was a blatant effort to tell Trump what he wanted to hear.
Around this time last year, as he entered the race, the Fed Governor began to float dovish talking points before swinging towards a fully dovish position. He repeatedly highlighed that inflation would come down after tariffs, talked about AI deflation and focused on risks to the jobs market.
Skip ahead to him losing the race and now it’s back to the sale ‘ole Waller: A predictable hawk.
He was asked about how it’s difficult to make decisions based on one inflation print and he responded that there can be noise in every print, but the last several months have been worse than expected.
“We’re building off of, basically, almost six months of higher, higher, higher, higher. Another higher one? I’m gonna treat that as signal,” he said. “This next one, whichever direction it goes, it’ll be a useful signal.”
The next CPI report is due on Tuesday and the odds of a hike this month are now up to 41%, from about 25% earlier today.
He added that if inflation comes down this week, he will need a “couple more” declining numbers to see that as a signal. That highlights a stance that’s unlikley to shift back to dovish any time soon.
The market is pricing in 41 bps in hikes through year end.
Similarly, Waller’s concerns about a weakening jobs market have been shown to be misplaced. He said uncertainty in parts of the labor market earlier this year has been resolved and the situation has seen a remarkable reversal.
With the hawkish talk, the US dollar has crept higher and USD/JPY touched 162.46, up 74 pips on the day.
