Waller’s remarks directly poured cold water on the market 😶

A 25-basis-point rate hike in December is already his baseline expectation. Even if inflation improved in October, he still leans toward another hike. More hawkishly, if tonight’s core CPI comes in at 0.3% or higher month over month, he thinks the Fed should consider raising rates by 50 basis points outright.

The market reaction was immediate:

After the remarks were released, gold $XAU fell from around 4121 to 4090, while BTC quickly dipped from 74700 to around 74100, then rebounded slightly.

That’s pretty interesting: U.S. stocks had just staged a strong rebound last night, and today Waller pushed rate-hike expectations higher again.

In my view, the market’s biggest headache right now is persistent inflation. The stronger the economy performs, the more confident the Fed is in maintaining its tight policy.

Tonight’s CPI at 21:30 is even more important: the market had previously expected core CPI to rise 0.2% month over month, but now Waller has put 0.3% directly on the table.

If the data really reaches that level, risk assets will likely face another round of pressure.

Tonight’s CPI report may carry more weight than previously thought.