Take Fed Governor Chris Waller, who seems to disagree with Warsh on limiting policy guidance, as a case in point.
Earlier this week, Waller completed his transition from a persistent dove through last year to an outright hawk. In a colorful speech, Waller — who regularly called for credit easing last year and even dissented against the committee's decision 12 months ago — now insists that rising core inflation has been a problem all year, even before the Iran war and subsequent energy shock. He said it was unlikely to return to the Fed's target on its own.
"Sternly staring at inflation until it melts before our withering gaze is not an option," he said, signaling a vote to raise interest rates unless elevated core inflation shows signs of subsiding soon.
Those comments came before this week's surprisingly soft June inflation reading, though the durability of that relief remains in question.
To be sure, Fed officials are entitled to change their minds, and they agree they should if the data warrants it. But it's rare to see positions change so sharply when neither core inflation trends nor the unemployment picture strictly demands it.
After all, the core personal consumption expenditures (PCE) inflation gauge never fell below 2.6% last year and has been rising steadily since April 2025 — even as Waller was calling for more cuts and the rest of the Fed delivered two rate cuts in the second half of last year. Meanwhile, the unemployment rate has been falling since November and has already returned to April's 4.2%.
Fellow Fed Governor and Trump appointee Michelle Bowman also made a dramatic shift. Once one of the resident hawks on the Fed board — pointedly becoming the first governor to dissent against a rate decision in 20 years by opposing a pre-election rate cut in September 2024 — she became one of the most ardent doves by the middle of last year. She and Waller dissented against the Fed's decision to hold rates last July in favor of moving faster with more cuts. Furthermore, she was still calling for more cuts as recently as January, but is now cautioning about the pass-through of energy prices as a possible reason to change her stance.
TLT•
