Christopher Waller used to be one of the Federal Reserve’s most reliable doves. The guy who spent months arguing that a softening labor market justified rate cuts has done something notable: he changed his mind.
On May 22, Waller signaled support for removing the “easing bias” language from Federal Open Market Committee statements, a move that would effectively tell markets the Fed is no longer leaning toward cuts. With the PCE index, the Fed’s preferred inflation gauge, hitting 3.8% in April, the shift isn’t exactly surprising. But it stung anyway. Bitcoin briefly dropped below $77,000 in the aftermath.
What Waller actually said, and what it means
When the committee includes an “easing bias” in its statements, it’s essentially telegraphing that rate cuts are more likely than hikes. Removing that language doesn’t mean hikes are coming tomorrow. It means the Fed wants to be seen as genuinely neutral, equally open to moving in either direction.
Waller was careful to clarify that he’s not pushing for an immediate rate increase. The federal funds rate currently sits at a target range of 3.5% to 3.75%, and he appears content to leave it there for now. But he wants the Fed’s posture to reflect reality, and reality right now is that inflation at 3.8% is nearly double the Fed’s 2% target.
What’s particularly interesting is why Waller shifted. His earlier dovishness was rooted in labor market anxiety. He worried that keeping rates elevated would break something in the jobs picture. Now, by his own assessment, the labor market has stabilized. It’s no longer the dominant driver of policy decisions. With employment fears receding, inflation moves to center stage, and inflation is not cooperating.
The broader Fed calculus
A PCE reading of 3.8% tells a specific story. Inflation isn’t just lingering in a few stubborn categories. It’s broadening across the economy, which makes it harder to dismiss as transitory or sector-specific. The Fed has been here before, of course, but the current dynamics are complicated by the fact that rates have already been cut from previous highs to the current 3.5%-3.75% range.
What this means for crypto and risk assets
Bitcoin’s dip below $77,000 following Waller’s remarks was immediate and telling. Traders who had been positioning for a rate-cutting cycle suddenly had to recalibrate.
For investors watching this space, the key variable isn’t what Waller said today. It’s what the next few PCE readings look like. If inflation continues trending at or above 3.8%, the pressure on the Fed to act, not just talk, will intensify.
What investors should watch closely: the June PCE release, any subsequent FOMC language changes, and whether other Fed governors start echoing Waller’s tone. If this shift from easing bias to neutral becomes a consensus rather than one governor’s opinion, the implications for risk assets could extend well beyond a brief dip below $77K.