Overview
- Fed Governor Christopher Waller told Reuters on Thursday he would support keeping the policy rate unchanged if August inflation shows continued disinflation, a statement that materially changed market expectations.
- Markets quickly repriced the odds of a September hike to about 50%, sending the Dow up roughly 600 points and pushing the U.S. 10‑year Treasury yield down to about 4.7–4.8%.
- Renewed U.S.–Iran exchanges have kept oil prices elevated in the low‑to‑mid $90s per barrel, which raises the risk that headline inflation could reaccelerate and force the Fed’s hand.
- Because Waller tied his view to incoming data, next week’s August CPI print and the payrolls report are now the pivotal events that could either lock in a pause or reopen the path to a hike.
- The episode highlights a split in Fed messaging that leaves markets and consumers exposed to sharp moves in borrowing costs if inflation surprises, while Treasury liquidity and global central‑bank divergence add further volatility risk.