The Federal Reserve has issued a clear "hint" at a rate cut in December.

Federal Reserve Governor Waller stated at a central bank seminar on Monday that he is inclined to cut rates at the December meeting, as monetary policy remains sufficiently restrictive to continue to exert downward pressure on inflation.

1. Waller is the first Federal Reserve official to speak this week and is a key figure influencing the Fed's inflation response strategy. His remarks seem to be warming up for Fed Chairman Powell. It is hard to imagine that Waller would take the risk of making such a clear "forecast" without Powell's tacit approval.

2. However, Waller also left himself an out. He stated that if inflation data (from now until the December meeting) unexpectedly rises, he would support keeping interest rates unchanged. The "inflation" data Waller referred to is the U.S. November CPI, which will be released on December 11, while the Fed will announce its December rate decision at 03:00 AM Beijing time on December 19.

* This statement sounds normal, but upon further thought, it feels off—what is about to be released this week is the non-farm employment data, yet Waller has focused on inflation, suggesting that the November non-farm data to be released this Friday is unlikely to influence the Fed's December decision. In other words, the Fed may believe that the November non-farm data will not be "hot" enough to prevent a rate cut.

3. Waller also stated that he expects to continue cutting rates next year until we approach a more neutral policy rate setting, but the pace and magnitude of the cuts are still to be determined.

For now, Trump's economic agenda has not disrupted the Fed's rate cut plans; the Fed continues to act at its own pace. As we have mentioned multiple times, Trump's policies will only begin to take shape in the second half of next year, with most policy adjustments set to take effect in 2026. The Fed has no need to disrupt its rhythm for events that have not yet occurred. From the beginning of rate cuts, the Fed has understood that this process will not be smooth sailing.