Inflation is cooling, and that changes the Feds next decision.
Chris Wallers own words point to the shift: recent data finally show signs of disinflation. If the August data confirm that progress toward 2% is real, holding rates at 3.50%3.75% may be enoughand a cut can return to the table.
The key is the reaction function. A temporary stall in disinflation could still justify a hike, but continued improvement removes the reason to tighten. Markets should watch the data, not the headlines: the path from here is no longer one-way toward higher rates.
This is the early stage of a macro regime change. Cooling inflation without a recession gives policymakers room to ease, and gives investors a reason to reassess rate-sensitive assets.