Wall Street indices erased some loses after Fed's Waller dovish remarks 🗽

Wall Street indices and short-term US interest rate futures gains after Fed Christopher Waller flags the risk of US inflation going too low. After this commentary, we can see increased bets on even bigger Fed rate cuts. According to Waller, of course 50 bps cut was the right choice. Waller also commented that falling inflation numbers start to worsen Federal Reserve about US economic conditions.

• Inflation is potentially on a lower path than we were expecting. I am a bit more concerned about inflation running softer.
• We see a lot of room to move down in the next 6 to12 months. We could even pause, depending on the data.
• If labor market worsens and inflation data softens quicker, we could do more.
• If data comes in fine, you could imagine going 25 next meeting or two.
• Inflation is softening much faster than I thought it was going to.
• CPI report and PPI report flowing into PCE inflation was my consideration.
• In terms of 25 bps vs 50 bps, my speech two weeks ago said 25 bps was a good idea but open to 50. The inflation data during the blackout pushed me to a 50 bps cut.
• I estimate that the August PCE will be very low
• We are at the point that the economy is strong, we want to keep it that way, 50 bps right policy action to do that.

Despite the first, positive markets reaction, Waller commentary is not very positive for Wall Street, because lower inflation numbers may signal that the US economy is cooling, increasing 'recession odds'.

Source: xStation5