Catch-up: Waller despatched shares rocketing greater within the US

Market impact:
Waller’s remarks:

landed against a market pricing in a September hike at 60-67% odds following Fed Chair Kevin Warsh’s hawkish Jackson Hole speech on 28 August, so the reaction reflects a repricing relative to that baseline rather than a standalone dovish signal. Treasury yields fell to session lows and S&P 500 futures moved higher immediately following the comments, with the move extending through the cash session into the best equity close in weeks. CME FedWatch-implied odds of a September hike, which fell to about 54.6% in the immediate reaction, have since eased further to near 50%, based on the latest reading. The remarks narrow, but do not close, the gap between Warsh’s and Waller’s positions, and leave the incoming August CPI print as the swing factor for the 15-16 September meeting.

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Waller’s pushback on hawkish Fed framing has pulled hike odds toward a coin flip and gave Wall Street its best session in weeks.

Summary:

• Fed Governor Christopher Waller said Thursday he would support holding rates steady at the 15-16 September FOMC meeting if incoming data continues to show disinflation.
• His comments came against a backdrop of hawkish Fed rhetoric, after Fed Chair Kevin Warsh’s 28 August Jackson Hole speech had pushed September hike odds up to 60-67%.
• Waller argued that the three-month annualised inflation trend, down to 3.05% from 4.76% in February, is a more reliable guide than annual figures, calling the improvement “considerable” and its pace “encouraging.”
• He said policy is currently “only slightly restrictive” and left open the possibility of supporting a hike if inflation data comes in hot.
• CME FedWatch-implied odds of a September hike fell to about 54.6% immediately after the remarks and have since eased further to near 50%, per the latest reading.
• US equities had their strongest session in weeks Thursday, with the S&P 500 up 1.06%, the Nasdaq up 1.4%, and the Dow up 624 points (1.18%).

Federal Reserve Governor Christopher Waller said Thursday that he would support holding interest rates steady at the central bank’s 15-16 September policy meeting if upcoming data continues to show inflation cooling, comments that pushed back against a market that had been leaning toward pricing in a hike.

That hawkish lean had built up since Fed Chair Kevin Warsh’s Jackson Hole speech on 28 August, where he argued that softer inflation readings did not tell the full story, comments that pushed market-implied odds of a September hike up to somewhere between 60 and 67 percent. Waller’s remarks on Thursday countered that framing directly, though not by dismissing the case for tighter policy altogether. He argued that annual inflation figures overstate the current trend, pointing instead to the three-month annualised rate on the Fed’s preferred gauge, which has fallen to 3.05% from 4.76% in February. He called that pace of improvement “considerable” and said the speed of the move was “encouraging.” Waller also said that current policy, at a 3.50%-3.75% target range, is “only slightly restrictive,” and made clear he would still consider a hike if the upcoming August CPI print, due the following week, comes in hotter than expected.

The market reaction was immediate. Treasury yields dropped to session lows and S&P 500 futures moved higher as soon as the comments crossed the wires. CME Group’s FedWatch tool showed the implied probability of a September hike falling by roughly 12 percentage points in the immediate reaction, to about 54.6%, and that probability has since eased further, sitting near 50% as of the latest reading. That repricing carried through the full session, with the S&P 500 closing up 1.06%, the Nasdaq Composite up 1.4%, and the Dow Jones Industrial Average up 624 points, or 1.18%, in one of the strongest sessions for US equities in weeks.

The remarks should be read as a data-conditional counterweight to Warsh’s framing rather than a fixed dovish stance. Waller’s own language kept a hike squarely on the table, and the coming inflation report, not Thursday’s comments alone, will determine which side of the debate prevails heading into the September meeting.

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Sentiment had already been shifting bullish earlier in the day, during Asian trading hours ahead of the US session. A Wall Street Journal report said Trump was privately weighing whether to declare the Iran war over, believing sustained economic pressure could ultimately force Tehran to dismantle its nuclear programme or lead to the regime’s collapse.

The report noted this was Trump’s own preferred framing, according to people familiar with internal discussions, even as the Pentagon separately extended troop deployments in the region into 2027. That story, circulating through the Asian session, added a further layer of risk appetite heading into Thursday’s US trade, ahead of Waller’s remarks later in the day.

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