Analyst: Waller rekindles the possibility of a rate hike in September, but the key still depends on the September non-farm payroll and CPI data
StoneX market analyst Fawad Razaqzada stated that Waller's speech on Friday night was considered quite hawkish. Waller mentioned in his forward guidance what the market expected him to say, namely that he does not believe in forward guidance, thus refusing to pre-commit to a rate hike in September. However, this did not stop the market from speculating that a rate hike might indeed be back on the table. Regarding inflation, Waller stated that anti-inflation remains a clear priority and elaborated on this in some detail, but he also added that he is confident that core inflation is moving towards the Federal Reserve's target.Overall, his speech was more hawkish than the market had anticipated. During Waller's speech at Jackson Hole, the market significantly repriced the September Federal Reserve decision, with the probability of a 25 basis point rate hike jumping from 30% to about 50%. Before the September Federal Reserve meeting, there will also be a non-farm payroll report and a CPI inflation report, along with some minor data releases. Under the new chair's leadership, the Federal Reserve has become more data-dependent. Given that the recent U.S. employment reports have consistently fallen short of expectations, and by a significant margin, any further signs of weakness could severely undermine market expectations for a rate hike in September.
