Waller gave a speech. He said the Fed might raise rates. He also said the Fed might not raise rates. This counts as news because someone wrote it down.
The headline warns us not to "fight the last war." Tremendous advice. Really cutting-edge strategic thinking from a guy whose job is to fight the last war. That's the entire mandate. Inflation happened, so now they adjust rates based on what inflation did. They are literally fighting the last war. They have no other war to fight. The current war is the last war by the time they measure it.
But Waller's really on to something here. Inflation has "expanded beyond" energy prices and tariffs. Meaning it spread to other things. Meaning prices went up for multiple items instead of one item. Groundbreaking observation. Someone get this man a second term.
Retail traders heard "hikes still possible" and immediately began updating their portfolios based on a speech that contains zero new information. They will lose money on this. Not because rates will or won't go up. They will lose money because they are using a Fed governor's conditional statement as a trading signal. A Fed governor said a thing might happen. He also said it might not happen. Fifty traders just leveraged their Robinhood accounts.
The best part is the phrase "still possible." Still. As if rate hikes ever stopped being possible. As if the Fed burned the rate hike button in a ceremony and Waller had to clarify they found a spare in the drawer. Rate hikes are always possible. That is what central banks do. They have two buttons and they press them based on vibes and lagging data.
Waller's out here warning everyone not to fight the last war while describing exactly how they will fight the last war.
Photo by Markus Winkler on Unsplash
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