Federal Reserve's Waller Debut

Federal Reserve's Waller Debut

Tonight, the global markets' focus is on Washington.

At 2 a.m. Beijing time on Thursday, the Federal Reserve will announce its interest rate decision. At 2:30 a.m., new Chair Waller will hold a press conference. This is Waller's first FOMC meeting since taking over the Fed.
The interest rate will remain unchanged, with little suspense. The federal funds rate will stay at 3.50%-3.75%, and CME data shows a 99% probability of no change. But what’s truly important about this meeting isn’t the rate. It’s three things.

First, will the policy statement remove language leaning toward easing?
What does this mean? In past Fed statements, there was a phrase indicating that the policy stance remains accommodative and ready to support the economy. If this phrase is removed, it means the Fed believes the need for easing is no longer necessary. The next step could be rate hikes. Goldman Sachs, Bank of America, and Morgan Stanley all expect Waller to remove this phrase. If removed, the dollar will rise, U.S. bond yields will increase, gold will fall, and emerging markets will decline.

Second, how will the dot plot change?
In March, the median of the dot plot indicated one rate cut within the year. Now, the market expects the median to remain unchanged for the year. There might even be a few members indicating a rate hike. If the dot plot shows expectations of rate hikes, the market’s pricing of the Fed’s policy path will be completely reshaped. This year isn’t about whether rates will be cut or not, but whether they will be raised.

Third, what will Waller say at the press conference?
Waller is not well known to the market. He’s not an academic like Bernanke, nor a lawyer like Powell. He’s a former investment banker and former White House economic advisor. What is his communication style? No one knows. That’s the biggest uncertainty. If he leans hawkish, markets will fall. If he leans dovish, markets will rise. But Waller is unlikely to make clear statements. What might he say? He will talk about data dependence, inflation trends, and policy flexibility. These are standard phrases with little information content. But markets will interpret signals from every microexpression and pause. That’s what makes Fed press conferences interesting. Nothing is said explicitly, yet everyone hears what they want to hear.

For investors, what matters most tonight?
It’s not guessing what Waller will say. It’s controlling your positions. If you’re fully invested, you might not sleep well tonight. If you’re lightly invested, no matter what Waller says, you can sleep peacefully. Barclays released a report saying that if the Fed remains hawkish, the S&P 500 could pull back 5%-8%. Goldman Sachs said that if the Fed stays dovish, the Nasdaq could rise again. Both scenarios are possible. When uncertain, keep cash. Cash isn’t the highest-yield asset, but it’s a safeguard that prevents forced selling during crises.
There will be big swings in the global markets tonight. Up or down. Be prepared. #我的Gate交易时刻