"New Federal Reserve News Agency" Nick Timiraos: Federal Reserve's Waller shows a subtle shift in stance

The direction of Federal Reserve policy has once again drawn significant market attention.

On Thursday, the Federal Reserve’s “mouthpiece” Nick Timiraos pointed out that Governor Waller's policy stance is quietly shifting—from previously hawkish to leaning toward holding steady. However, the final decision will still hinge on the August inflation data to be released in two weeks. Previously, Waller warned that the August CPI data would be critical in guiding his September vote, and if inflation runs hot, he would consider supporting a rate hike.

Timiraos stated that Waller’s core position has not fundamentally changed since July, but his policy inclination has clearly shifted: In July, he was cautious and tending toward tightening, but now he is more optimistic and inclined to keep rates unchanged at the September 15–16 policy meeting.

According to Timiraos’ interpretation, Waller made it clear in recent remarks that the latest data finally show several signs of cooling inflation. He noted that if data released in the next two weeks continue to improve, he would be inclined to support maintaining the federal funds rate target at its current level.

This marks a contrast with his position in July, when Waller was concerned about the inflation outlook and leaned toward further tightening. Timiraos characterizes this change as a "tilt" in stance, rather than a fundamental reversal of core views. The subtle difference in wording is worth investors’ attention.

Waller has set a clear decision-making logic for the September policy meeting. According to his public statements, two scenarios will lead to very different policy outcomes: first, if inflation continues making progress toward the 2% target, he will support keeping rates unchanged; second, if the August inflation data suggest the earlier improvement was only temporary, then "raising the policy rate at the September 15–16 Federal Open Market Committee meeting may be appropriate."

Waller also acknowledged that military conflicts, trade policy, and artificial intelligence still contribute significant uncertainties to prices and economic activity—these are the main external factors affecting policy assessments.

Regarding policy communication, Timiraos used a baseball umpire’s "strike zone" as a metaphor to explain his concept of a transparent policy reaction function.

“Both sides want to hit good balls, but before figuring out the umpire’s strike zone, it’s impossible to know how to proceed. The strike zone is the umpire’s reaction function: a ball here is a strike, a ball there is a ball. Players don’t need a perfect strike zone, they just need to have a general sense of its boundaries and the assurance that—this range won’t change dramatically from pitch to pitch. No need for perfection, and they can still hit well.” That’s how Timiraos described it.

This statement echoes the earlier “play the ball, not the Fed” analogy from Walsh, and serves as a footnote to Waller’s own approach to policy communication: transparency in rules and stable expectations as core principles, rather than seeking absolute precision in policy signaling.