Waller's 'Rebellious' Logic: Letting the Market Guide the Fed, but the Fed May Not Follow

On July 1, institutional analyst Jersey stated that Waller seems fully committed to undermining the Federal Reserve's recent forward guidance. From a market perspective, this means the Fed may surprise the market more frequently—despite Waller having expressed in a June press conference his desire for the market to guide the Fed. This implies that if the market has already priced in a certain change, the Fed may sometimes act contrary to that expectation, as the Fed's reaction function could experience an information vacuum. I recall the last significant surprise was in September 2015, when the market had priced in over a 90% probability of a rate hike, but the Fed did not act due to the depreciation of other currencies.