Fed Chair Waller stated that if inflation does not clearly recede, further rate hikes remain possible, and vowed to achieve the 2% target—gold plunged sharply. How should we interpret this statement?

Waller’s hawkish speech at Jackson Hole took place some time ago, and domestic interpretations have been relatively consistent: This was a hawkish speech—but its implicit message is not a genuine shift toward hawkishness; or, rate hikes remain an option, yet are not urgent; or, it aims to restore the Fed’s credibility. I have long held that domestic institutions—including top-tier research bodies—naturally harbor a perspective bias when analyzing U.S. financial markets. Across the Pacific Ocean, China and the U.S. differ fundamentally in economic structure, market logic, and modes of thinking. After the release of the September 3 ISM Services PMI data, it became clearer why domestic financial institutions interpreted Waller’s remarks moderately, while Wall Street’s leading investment banks swiftly adjusted their forecasts. Bank of America, Barclays, and others collectively turned hawkish. Meanwhile, CME’s (Chicago Mercantile Exchange) FedWatch Tool registered an immediate spike: the probability of a 25-basis-point hike in September jumped from roughly 35% before the speech to nearly 60% afterward. The U.S. economy’s core lifeline is the services sector—which accounts for a very high share of GDP—making the Services PMI the true forward-looking barometer of the economy. This latest reading was highly divergent—even bizarre. The composite index stood at 55.4, new orders at 60.9, yet the employment index fell to just 47.8. Most critically, the prices-paid sub-index surged to 72.6—a level trending sharply upward. Historically, such a figure has only appeared during periods of extreme overheating and runaway inflation—namely, 2005, 2008, and 2022. The Services Prices-Paid Index serves as an ultra-short-term leading indicator for the core CPI services component—typically ahead by one to two months. If the PMI is still merely a warning signal, then the Federal Reserve’s Beige Book—updated simultaneously on September 3—is the smoking gun. This August Beige Book, officially titled the "Summary of Commentary on Current Economic Conditions by Federal Reserve District," reflects real-time business sentiment more closely than headline data—and constitutes authoritative frontline economic intelligence. The August Beige Book reveals far more severe pricing pressures than publicly available data suggest.

Wall Street Insights Morning Briefing FM-Radio | September 4, 2025

Trump reiterated that tariffs could replace income tax; the U.S. was reportedly using tariffs as leverage to oppose the UN’s shipping emissions agreement. Trump stated tariffs are 'crucial' to America’s success. Media reports indicate the U.S. has urged other countries to reject a UN agreement aimed at cutting emissions from shipping fuel—or face tariffs, visa restrictions, and port fees. The U.S. recently contacted International Maritime Organization (IMO) member states, warning them against adopting the so-called 'net-zero framework'; the Netherlands confirmed receiving oral warnings from U.S. representatives. The White House made a public appearance: Trump addressed questions about his 'health issues'—saying, 'I rested for two days, and they immediately suspected something was wrong.' After holding a lengthy cabinet meeting last Tuesday, Trump remained out of the public eye for nearly a week and had no media interactions—sparking widespread discussion on social media and fueling speculation about potential health deterioration or even death. Photos showing bruises on his hands further amplified such rumors. Fed Governor Christopher Waller: A rate cut should begin this month, with multiple cuts possible over the next 3–6 months—the pace will depend on incoming data. Waller stated the Fed should initiate easing this month and conduct several cuts over the coming months, though he remains open on timing, emphasizing data dependence. He revealed having previously spoken with Beth Hammack but confirmed no interviews—nor any scheduled interviews—regarding the Fed Chair position. Fed Nominee Miran: The Fed’s primary mandate is preventing depression and high inflation; independence will be preserved. Stephen Miran, President Trump’s nominee for Fed Board member, pledged to uphold the central bank’s independence and its 'dual mandate'—price stability and maximum employment. In his opening statement submitted in advance to the Senate Banking Committee, Miran said: 'In my view, the most important responsibility of a central bank is to prevent Great Depressions and hyperinflation. Central bank independence is a critical element of its success.' Fed Beige Book: Consumer spending flat or declining; price increases reported across all districts. In its latest Beige Book released Wednesday local time, the Fed reported little change in economic activity across most U.S. regions over recent weeks. With many households’ wages failing to keep pace with rising prices, consumer spending has stagnated or declined. Price increases were reported across all districts—10 districts cited 'moderate or slight' inflation, while two reported 'strong input price growth.' Mentions of 'inflation' in this Beige Book remain near a four-year low, and references to 'slowing' dropped sharply compared to July. U.S. July JOLTS job openings fell to a 10-month low—rarely seen since the pandemic. July JOLTS job openings totaled 7.181 million—the lowest since September 2024 and only the second time since late 2020 below 7.2 million. Job openings in healthcare—the key driver of U.S. employment growth this year—fell to their lowest level since 2021. Hiring rebounded from a one-year low, while layoffs hit their highest level since September 2024. These data reinforce market expectations for a Fed rate cut in September.

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