Sep 4, 2026 · 6 min

Waller backs steady rates as disinflation reshapes Fed debate

UBS On-Air: Paul Donovan Daily Audio 'Talking calmly'

The episode explains why competing views inside the Federal Reserve moved markets even as geopolitical conflict and tariffs threaten renewed inflation.

3 key takeaways

1Waller supports holding interest rates steady as disinflation continues in the United States.
2Geopolitical conflict and tariffs remain countervailing forces that could generate inflationary pressure.
3Waller’s position and Williams’ outlook had a notable impact on financial markets.

Don't miss

Donovan’s comparison of Waller and Williams shows why their contrasting signals had a notable market impact.

The brief

Paul Donovan opens with a morning briefing on United States monetary policy, focusing on Federal Reserve Governor Waller’s case for keeping interest rates unchanged as disinflation continues.

Waller’s view carries a clear caveat: geopolitical conflict and tariffs could push inflation higher, complicating the case for steady rates.

Donovan contrasts Waller’s position with New York Fed President Williams’ outlook, showing how differences in official commentary shaped market expectations.

The episode’s central tension is whether ongoing disinflation should dominate policy thinking or yield to risks that could revive inflationary pressure.

What was said on this episode

6 statements · 3 positive · 3 negative

Paul Donovanon Christopher Waller and John WilliamsPositive1:11
Waller and Williams command investor respect and their remarks move financial markets.
“These two FOMC voters receive a level of respect from investors that Fed Chair Walsh has yet to attain, and their words have moved financial markets.”
Listen at 1:11
Paul Donovanon Immigration trendsNegative2:33
Lower immigration reduces trend employment growth and trend GDP growth.
“Lower immigration trends mean lower trend employment growth and lower trend GDP growth than would otherwise be the case.”
Listen at 2:33
Paul Donovanon US average hourly earningsPositive3:09
Average hourly earnings should indicate no US wage-price spiral.
“They should signal the absence of a wage price spiral or anything remotely resembling a wage price spiral in the United States.”
Listen at 3:09
Paul Donovanon ECB interest ratesNegative3:59
The ECB will raise rates again, worsening its earlier policy error.
“The market is convinced that the ECB will increase rates again, compounding the earlier policy error.”
Listen at 3:59
Paul Donovanon ECB interest ratesPositive4:13
ECB policy mistakes may be reversed through rate cuts next year.
“investors can then start to turn their attention to when the policy mistakes will be reversed, with rate cuts, maybe sometime next year.”
Listen at 4:13
Paul Donovanon Bank of England interest ratesNegative4:27
Bailey should not signal a desire to raise Bank of England rates.
“Bailey shouldn't be signalling any desire to raise rates.”
Listen at 4:27

Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.