Governor, Federal Reserve Board of Governors
Federal Reserve Governor Chris Waller Talks War-Related Inflation, Private Credit | Bloomberg Talks
Federal Reserve Governor Christopher Waller joined "Bloomberg Surveillance TV" to discuss the potential inflationary impact of war with Iran, US payrolls, ongoing risks from tariffs, and his view of private credit markets.
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About Christopher Waller
On June 22, 2026, Federal Reserve Governor Christopher Waller delivered welcoming remarks at the Fifth Conference on the International Roles of the U.S. Dollar, co-hosted with the Federal Reserve Bank of New York. Waller described the international monetary system as being "in a period of profound change" and noted that technological innovation, particularly distributed ledger technologies and tokenized assets like stablecoins, is "creating new channels for global dollar intermediation that operate alongside or sometimes in conjunction with traditional banking and payment systems." He stated that the dollar's international role is evolving as a result. Waller expressed that increased competition from the private sector in financial services is beneficial, saying, "As an economist, I believe that is a good thing. More competition generally leads to better outcomes for both consumers and society as a whole." Waller also commented on the passing of former Federal Reserve Chairman Alan Greenspan, calling it "a sad day for the Fed." In his remarks, Waller noted that the conference papers would examine topics such as the rapid growth of stablecoin-based transactions, decentralized foreign exchange trading, alternative cross-border payment rails, and whether stablecoins may reinforce or introduce tensions into the international monetary system. At the outset of his speech, Waller said, "For all the networks, no forward guidance from me today. Maybe later, but not today."
Transcript (30 segments)
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Bloomberg Audio Studios0:02
Bloomberg Audio Studios, podcasts, radio, news.
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Host0:07
Joining us around the table, I'm pleased to say here in New York, the Fed Governor Chris Waller. Governor Waller, good to see you, sir.
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Christopher Waller0:13
Good to see you all again.
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Host0:14
When we planned this, I thought you'd come in and talk about the labor market, but something else has taken over. What's your assessment of developments in the Middle East and ultimately what it means for you and the committee?
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Christopher Waller0:23
Yeah. I mean, I guess it's exactly the thing is what you're going to see is you're going to see a spike in gasoline prices. That's what the American citizens are going to see when they go to the pump and they're going to stare at it and be a little shocked in terms of how things go. But for us, thinking about policy going forward, this is unlikely to cause sustained inflation. This one reason we don't look at energy prices when we look at core. Core is a better predictor of future inflation. You're going to see this, but once these kind of supply chain issues that you laid out, Lisa, once they unravel, this will start coming back down. So, it's kind of very odd to think about the Fed maybe changing rates six months from now based on this. If it's unwound in a like as you said, Jonathan, in a couple of weeks or even two months, it's not going to be a big factor down the road. So, this is why we never look at energy prices. They bounce up, they come back down. It's not that it's something that we don't feel sympathy for people that that's what they have to pay when they put the gas in their cars, but for us thinking about the longer term in terms of policy. This is something we're just going to have to kind of put off for now.
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Host1:27
When does it become something bigger?
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Christopher Waller1:29
It becomes bigger if it becomes more permanent because then what's going to happen? You're going to see this jump in prices. Then it'll start bleeding through to other parts of the economy. Energy is a big part. It feeds into everything else and then somehow those energy costs get passed along like everything else. That's what you're more worried about.
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Host1:45
Economists on any given day, Lisa, Mike, myself, and they'll talk about the experience of the 70s and coming out of the pandemic and they'll say things like that officials at the Federal Reserve are somewhat conditioned, scarred by some of that. Is that your experience of things?
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Christopher Waller1:57
Well, in the 70s, remember, we didn't just have one. We had massive oil shocks. If you take 73, the price of oil quadrupled overnight. It went from $4 a barrel to $12 a barrel or three or went from three to whatever the numbers were. But that was a shock. And it never came back down. And then there was another one. Every time you turned around, there was another oil shock. Then Iran oil embargo in 79. So that was kind of the problem with the oil shocks. They just kept coming and coming and coming. So it's not clear this will be one shock after another after another. So that's why I'm more willing to say this is I hate to say, but more like a one-off event than what we saw in the 1970s.
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Host2:35
Well, as Rosanna Dana used to say, it's always something because if it's not just the oil shocks, it's the whole idea now we're going to have a whole new round of tariffs coming through the economy. And we've got this low fire, low hire economy. How long do you think that continues? Does this just push out the time period for companies to sit on their hands, not invest because they don't know what's going to happen?
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Christopher Waller2:59
Yeah, I mean this is one of the things I've been concerned about since last June is how weak the labor market has been. There were a lot of factors last summer that were driving this kind of low fire. It looked like maybe in January we might be turning a corner. We'll find out today whether that was as I said last week signal or noise. But you know when you're in this world in which the labor market even with 130,000 jobs it was really concentrating a couple of sectors. 80% of the economy, the labor market wasn't doing anything. It was zero to negative. So that kind of fragility wouldn't take much for some sort of a serious shock to sort of start pushing people in another direction. Whether this is that kind of shock or not, we'll start finding out.
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Host3:43
Yeah, it's early because of course these are going to be January numbers, but you've been on record as saying you'd like to cut more because you're still worried about where the labor market is. What would it take to get you to back off on that feeling? Because if we get the same sort of numbers we had in December, it still shows very narrow breadth of hiring and it still shows some reasonably good numbers for hiring.
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Christopher Waller4:10
Yeah, even with the January report, like I said it was all concentrated in a couple of sectors. So that was good. They were robust. We got a big number well above everybody's estimate of break even. But the concentration didn't give me a lot of comfort that the economy as a whole was doing really well. So that's where it, you know, my brain is telling me the number was good and the economy looks okay. It was above break even, but my guts are telling me it may not be that good. And that's where I'm waiting to see what today's number is. I'm almost certain it's going to get revised down because this has been a pattern in January the last few years.
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Host4:47
Let me pair these two ideas. The idea of the oil shock that's creating some concerns about inflation and then a labor market that kind of is in question, right? Is it decelerating or is it reaccelerating? How much has your reaction changed potentially to today's report given the fact that we do see energy prices pushing on inflation? In other words, would you be less inclined to cut rates if there is strength that's demonstrated in the labor market today?
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Christopher Waller5:13
Yeah, that's kind of what I was hinting at last week that if we get another solid jobs report than last month, this month looks like the labor market's turning around. A lot of the downside risk I've been worried about for six months is kind of going away. We're going to get a hot PCE number given what we already have seen coming in. That's going to probably print from everything I've seen about a point four. Usually that comes down again. We've had this January effect. We have some more pass-throughs of tariffs, but because the inflation's hot, it's going to look even worse now with the oil prices, at least on headline. And then if you get a solid job number, it does say you can sit there and wait.
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Host5:54
Let's say the counterfactual. Let's say we don't get a good print. Let's say we see the weakness that you see right now when you talk to people in your district and that you speak to in the different districts as well as beyond. How much do you think the Fed should react to this? Because it's sort of the dual mandate is in conflict in absolutely the wrong way.
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Christopher Waller6:11
Yeah. I mean that's the tension we've had for the last years. I've been more worried about the labor market risk than the inflation risk. I've always believed inflation was going to come back down once tariff effects passed through. My other colleagues on the committee are much more concerned about the inflation. It's been high for five years. They're not seeing it coming down and they think the labor market is all stabilized. It's all supply side. So these are the two different views that people have about thinking about policy. And I was more willing to cut rates because I was more worried about the labor market, not as worried about inflation coming down. But like I said, if the labor market continues to go weak, if this thing comes in, I mean, ADP was promising the other day. So if the labor market is good, inflation's hotter than we think, it's fine to kind of wait another meeting and kind of see, but if we get a bad number or January's revised down to some really low number like ADP got revised in half, the labor market's just not that good. And so the question is why are you just sitting on your hands? So I could certainly see this meeting going either way depending on the data this week and the CPI next week comes in.
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Host7:14
I hate to be the one to ask this question, but what's a good report? Because at 8:30 Eastern time, we'll all be asking that question of ourselves. What's good to you? What does good look like?
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Christopher Waller7:23
Well, I think good would be if you saw another number like January, that would be really good because you're well above everybody's break even estimates at that point. And that'd be two in a row. Looks like it's going through. We got very good numbers off the ISM manufacturing and services this week. That's another indication that maybe things are turning around. So if that's the case, I'm starting to see less downside risk. Now on the tariff stuff, I still have a view that all the tariff risk is to the downside. I just don't see big increases in tariffs spread all over the place. If anything, they're going to come down. Estimates of this are coming down. Deals are going to potentially get made. So I don't see a lot of tariff risk going forward even though there's more uncertainty, there's always the uncertainty. I don't see a lot of price pressures from what we think could happen going forward. So that's going to bring inflation down or take pressure off and it'll take some of the uncertainty off at some point.
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Host8:15
Well, it becomes a question of what problem are you trying to solve and what tool are you using to do it? How would cutting rates by 25 or 50 basis points help the labor market if companies are sitting on their hands because they're still waiting for tariff news and we've got a war going on?
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Christopher Waller8:33
Yeah. I mean, we can always say, 'Ah, we can't do anything. Just sit there.' That's not my job. My job is try to help the economy and achieve our dual mandate. And if the labor market's not looking good, then I have to make this tradeoff.
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Host8:44
But does it make a difference to the CEOs?
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Christopher Waller8:48
Well, maybe not. I mean, that's what I'm saying. We could argue about whether monetary policy has any effect in general on the labor market. There's a, you know, you go back in economics back to the 80s and 90s, there's a whole camp of people that said monetary policy is completely irrelevant for the economy. So, quit wasting your time.
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Host9:05
You're opening up a very different conversation.
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Christopher Waller9:07
Yeah, that's a whole we could spend a long time on.
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Host9:09
I wanted to squeeze this in. I actually think it's one of the more important topics at the moment. We're not seeing a tightening of financial conditions, a material one, in public markets. I don't see that in stocks. I don't see that in bond yields. I'm wondering what on earth you see in private markets because every day there's another headline about another fund, another company struggling to meet redemptions. What is the Federal Reserve assessment of what is happening? Because that has powered this economy. Some people might say in a bigger way than the Federal Reserve or for that matter public markets have. What is going on?
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Christopher Waller9:38
Well, there's a couple things. I mean, in general, I don't see really big widespread problems in the private credit market. What you're seeing is a couple cases of certainly fraud. Is that fraud widespread? I don't, you know, it's hard to believe that the entire private credit market is being driven by fraud or bubble posting of collateral. So these are kind of these one-off things that get a lot of headlines, but it's not clear it's systemic. You have to kind of look at whether there are a lot of, you know, there's different types of private credit. There's stuff that's in high yield, you know, risky junk bond stuff, and there's other stuff that's better quality in terms of what they're funding. So, I don't think as a whole the private credit market is in any serious trouble. But, you're going to have these things popping up here and there, but I don't think there's enough of it that's going to somehow drive down the financial markets and create any kind of financial stability problems.
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Host10:32
Governor, it's good to see you. Thanks for making time for us.
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Christopher Waller10:33
Good to see you all.
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Host10:35
Thank you, sir. Longer conversation about your role in the future. Looking forward to that, Governor. Thank you, Federal Reserve Governor Chris Waller there on the economy, the shock in the Middle East and on markets.