Federal Reserve's Waller says "there's no need to rush into rate cuts," but releases more expectations for rate cuts

Federal Reserve Governor Waller, one of the five candidates for Federal Reserve Chair, spoke on CNBC last night.

┈┈➤ Waller's speech

First, he stated that based on the current economic outlook, "there's no need to rush into rate cuts."

Second, he released more expectations for rate cuts than the December dot plot: "the current interest rate level is 50 to 100 basis points above the neutral rate."

Third, he acknowledged the weakness in the labor market.

Fourth, he believes inflation is under control.

Fifth, he denied that the recent bond purchases were an economic stimulus.

Bee Brother believes Waller's speech is relatively mature; as one of the candidates for the new chair of the Federal Reserve, Waller's speech caters somewhat to Trump's inclinations without excessive flattery.

At the same time, it provided rational guidance to market expectations. On one hand, it released certain dovish signals. On the other hand, by denying the urgency of rate cuts, it aims to weaken expectations of a recession.

┈┈➤ Market Reaction

Waller's speech aligns with Bee Brother's previous analysis: the U.S. economy is not doing well, and rate cuts are inevitable sooner or later; the dot plot is hawkish as part of expectation management (making promises), and rate cuts are possible in March-April.

Currently, CME interest rate futures show an increased expectation for rate cuts in March-April. In particular, the expectation for a rate cut in April has clearly exceeded that of no rate cut.

Polymarket's probability of a rate cut in April has slightly decreased, but the probability of a rate cut in March has slightly increased, with even expectations for a 50 basis point rate cut in March.

Polymarket still shows the highest probability of no rate cut in March-April, while CME interest rate futures calculate an expectation of a 25 basis point rate cut in April.