{"id":437487,"date":"2026-09-03T19:42:07","date_gmt":"2026-09-03T12:42:07","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/feds-waller-finally-seeing-some-signs-of-disinflation-in-recent-data-how-are-the-markets-reacting-437487\/"},"modified":"2026-09-03T19:42:07","modified_gmt":"2026-09-03T12:42:07","slug":"feds-waller-finally-seeing-some-signs-of-disinflation-in-recent-data-how-are-the-markets-reacting","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/feds-waller-finally-seeing-some-signs-of-disinflation-in-recent-data-how-are-the-markets-reacting-437487\/","title":{"rendered":"Feds Waller: Finally seeing some signs of disinflation in recent data. How are the markets reacting?"},"content":{"rendered":"<div>\n<p>Fed&#8217;s Waller is speaking and although he is keeping the door open for a tightening is also encouraged by signs of disinflation.\u00a0 Waller says:<\/p>\n<ul>\n<li>Open to leaving rates unchanged at the September meeting if inflation cools.\n<\/li>\n<li>\nFinally seeing some signs of disinflation in recent data.\n<\/li>\n<li>\nCommunicating his reaction function helps the public plan.\n<\/li>\n<li>\nWould consider a September rate hike if August inflation data comes in hot.\n<\/li>\n<li>\nInclined to support holding rates steady at the September 15\u201316 meeting if August inflation data shows continued progress.\n<\/li>\n<li>\nIt may not take much acceleration in inflation to support tighter policy.\n<\/li>\n<li>\nIf August inflation data shows progress has reversed, a \u201csmall adjustment\u201d to the policy rate would help ensure progress resumes.\n<\/li>\n<li>\nGDP is growing at a solid pace, while equity price gains should sustain consumption growth.\n<\/li>\n<li>\nConsiderable uncertainty surrounds the outlook for prices and the economy because of military conflicts, trade policy and AI.\n<\/li>\n<li>\nInflation remains significantly above the Fed\u2019s 2% target.\n<\/li>\n<li>\nAI investment is a legitimate part of GDP, and AI will reliably raise productivity.\n<\/li>\n<li>\nElevated energy prices and tariffs are not significant sources of ongoing inflation pressure.\n<\/li>\n<li>\nUnderlying inflation is doing better than the core numbers suggest.\n<\/li>\n<li>\nThe labor market is in satisfactory shape; expects more of the same in the August jobs report.\n<\/li>\n<li>\nSees some upside inflation risk, though wage growth is consistent with inflation returning to 2%.\n<\/li>\n<li>\nCore PCE is not the best guide to where inflation stands.\n<\/li>\n<li>\nSees considerable improvement, with an encouraging pace of progress in three-month core inflation.\n<\/li>\n<li>\nPending revisions to the Commerce Department\u2019s non-market price estimate could lower 12-month PCE inflation by a few tenths of a percentage point.<\/li>\n<li>Says that we should start seeing some lower numbers on inflation. He expects a reasonable CPI <\/li>\n<li>When you are near a turning point you have to put more weight on near-term data.<\/li>\n<\/ul>\n<p class=\"PDq2pG_selectionAnchorContainer\">Waller is keeping his options open ahead of the September meeting, with the August inflation data likely to decide which way he leans. If inflation continues to show progress, he would support keeping rates unchanged. However, if the data comes in hot, a rate hike is on the table\u2014and he warns it may not take much acceleration in inflation to justify tighter policy.<\/p>\n<p>The good news is that Waller sees underlying inflation doing better than the headline core numbers suggest. The concern is that inflation remains well above the Fed\u2019s 2% target, while growth and the labor market remain solid. Putting it another way, Waller is comfortable waiting if inflation cooperates, but prepared to hike if it does not. Rate cuts are not the message from these comments.<\/p>\n<p>The US yields are pushing to the downside with the 10 year down -320 basis points at 4.756%. The 2 year yield is down 5.4 basis points at 4.331%.<\/p>\n<p>US stock prices are also ticking to the upside (but modestly) with the Dow up 223 points in premarket trading. The S&amp;P is p 8.4 points. The Nasdaq is still modestly lower by -12 points.\u00a0\u00a0<\/p>\n<p>The Federal Reserve will announce its interest rate decision on September 16. The US PPI data will be released on September 10 next week while the US CPI data will be released on September 11. From that data, economic models will forecast the PCE data which is the more favored measure of inflation by the Fed. However the official PCE data will not be released until later this month &#8211; after the FOMC rate decision.<\/p>\n<p>The market is now pricing in a 60% chance of a rate hike. That is still down from about 67% yesterday but certainly well up from the 30% numbers that we were seeing a week or so ago.<\/p>\n<p class=\"PDq2pG_selectionAnchorContainer\">Why does that matter? <\/p>\n<p class=\"PDq2pG_selectionAnchorContainer\">The 2-year Treasury yield is particularly sensitive to expectations for Fed policy. With traders pricing in a slightly lower chance of tightening, that yield is down 5.4 basis points to 4.331%. The 10-year yield is also lower, down 3.2 basis points to 4.756%. Lower yields can help support stocks by reducing borrowing costs and making future earnings more attractive. They can also weigh on the USD if the interest rate advantage of holding dollars narrows.<\/p>\n<p>Putting it another way, a Fed speaker can leave the door open to a hike and still give markets some relief. What matters is where expectations were before the comments and how they change afterward. Today\u2019s decline in yields and modest improvement in stock futures are consistent with traders focusing on Waller\u2019s encouragement over inflation. That does not mean he is signaling a rate cut.<\/p>\n<p>The next inflation reports become especially important because Waller is telling traders what would influence his vote. Softer numbers would strengthen the case for holding steady. Hotter numbers would push the discussion back toward a hike. His comment about putting more weight on near-term data increases the importance of those upcoming releases.<\/p>\n<p>For traders, the fundamental news provides the catalyst, but the price action and technical levels help tell us whether the market is following through. If lower yields weigh on the USD, look for dollar selling to take the currency pairs through key moving averages and swing areas\u2014and stay through those levels. If the breaks fail, the sellers may have had their shot. The headlines can shift expectations. The technical levels help define the bias and the risk.<\/p>\n<p>                            This article was written by Greg Michalowski at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Fed&#8217;s Waller is speaking and although he is keeping the door open for a tightening is also encouraged by signs of disinflation.\u00a0 Waller says: Open to leaving rates unchanged at the September&hellip;<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-437487","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/437487","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=437487"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/437487\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=437487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=437487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=437487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}