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| You have already had the half of Waller’s speech that moved the price. The half that names the release he is waiting for sits further down, and it points somewhere else. |
| Some mornings the honest answer is we are buying nothing. Pro says why, shows the numbers, and tells you what would change our mind. |
Waller named the data he is waiting for
Christopher Waller gave an interview in Washington on Thursday and told the room which release decides his vote at the September meeting. Markets listened all afternoon, then traded a different one.
The view this morning is simple, and almost everybody holds it. The August employment report lands at half past eight in New York. It settles whether the Fed raises rates in twelve days.
Read the speech and his condition is plain, and it is about prices. Recent data finally show some signs of disinflation, he said. Then came the condition. "If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting." The other half is the same test failed. "If the incoming data for August show this improvement has been fleeting, then it may be appropriate to raise the policy rate."
The data due over the next two weeks is inflation data. None of it is out yet.
On the jobs number itself he was close to dismissive. "With economic activity and the labor market in good shape, they are not a large factor in my determination of the appropriate setting of monetary policy." Then he told the room what he expects this morning. Job creation has averaged 60,000 a month this year through July. Unemployment fell to 4.1% in July. He expects, in his words, "more of the same tomorrow when we get the August employment report."
So the man whose sentence moved the price has already said this morning's release is not his test, and that he expects it to be ordinary. A whole afternoon of trading went on a condition that is not out yet.
Twelve days separate this morning from the decision. In that time the committee sees the August inflation figures, and Waller has told anyone listening that this is the stretch he meant. He buried none of it. He said it in his opening paragraph, before he described the economy or the labor market at all.
That is the part inside the speech. The part outside it is harder, because the interest rate that moved is not the one the Fed sets.
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