The governor speech

Federal Reserve Governor Christopher Waller addressed the Society of Professional Economists in London yesterday, emphasizing the use of economic theory and data to assess the U.S. economy amid a 43-day government shutdown that delayed official statistics. The title of the speech was “the case for continuing rate cuts”. His main points were: (1) weakening labor market, attributed to weak labor demand, (2) inflation under control, with tariffs causing one-off increases, but with underlying measures close to the Fed target, and (3) weakening economic activity, with consumer sentiment at new lows. With those points, Waller supports a 25 bps cut on December 10th as a risk management measure. Obviously, governor Waller is building his case to become the next Fed chair in May. He’s making sure the message crosses the ocean to Washington and that President Trump and Treasury Secretary Bessent know he is their man at the Fed. Unfortunately for him, his speech has not moved the needle, as you can see in the chart below, and the market still thinks there will not be a cut in December. They need to hear it from the man himself (Powell), or they need to see a nose dive in the equity market, or another credit cockroach hitting the news.

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