Christopher Waller's gamble is a tax on the poor
By Alma Cordero · Reporting from El Paso ·
When the price of a gallon of milk or a bag of flour jumps in the Segundo Barrio, it isn’t a "data point" for the people living there.
When the price of a gallon of milk or a bag of flour jumps in the Segundo Barrio, it isn’t a "data point" for the people living there. It is a crisis of subtraction—something else, usually a medicine or a light bill, has to go. So when Christopher Waller, a Governor of the Federal Reserve, suggests we "give disinflation a chance," it sounds less like economic policy and more like a gamble played with other people's rent.
A House Divided by Decimals
The Federal Reserve is currently a room full of people staring at the same numbers but seeing different futures. According to Yonhap, Christopher Waller is inclined to keep interest rates steady at the September 15 and 16 FOMC meeting, provided the August inflation data doesn't spike. He sees "some signs of disinflation," even though the July CPI sat at 3.4% and the PCE price index at 3.7%—well above the Fed's 2% target.
But the Fed isn't in agreement. Infobae reports that Governor Michael Barr is ready to vote for a rate increase, and Fed Chair Kevin Warsh has been blunt, stating at Jackson Hole that there is still "work to do." The markets, always twitchy, reacted instantly; CNA noted the dollar index slipped and the yen jumped as the odds of a September hike dropped to 46%. It is the same nervous energy we felt during Taper Tantrum 2.0 in 2021, where the Fed’s hesitation to signal its next move left the rest of us guessing while the wealthy hedged their bets.
The Danger of the Premature Pause
Waller is betting that the cooling trend is real. But in my experience, the "trend" for the working class is usually a downward slide. The Fed's current hesitation reminds me of the danger of premature easing. We must look to the Proses of the 1990s disinflation, where the central bank understood that you do not stop the medicine the moment the fever breaks; you keep it going until the infection is gone. The mechanism is simple: if you ease too early, you unanchor inflation expectations, and the prices that just started to settle will rocket back up.
We have already seen what happens when the Fed tries to manufacture stability through tools like Quantitative easing (QE), pumping liquidity into the system only to leave the actual workers chasing a cost of living they can no longer catch. To pause now, based on "ephemeral" August indicators, is to risk a rebound that will gut the housekeepers and the field hands who have no cushion to absorb another spike.
The Cost of a Mistake
The divide between Waller and the hawkish stance of Kevin Warsh and Michael Barr isn't just academic. It is a question of who bears the risk. If Waller wins and the pause is a mistake, the resulting inflation is a tax on the poor. If Warsh and Barr win and hike rates, the cost of borrowing rises, but the price of bread stops climbing.
The FOMC will likely split, but the only responsible path is the one that refuses to blink. We cannot afford a "chance" that fails. Kevin Warsh is right: there is work to do, and that work isn't finished until the 2% target is a reality, not a hope. The Fed must hike in September; anything less is a betrayal of the people who can't afford to wait for the data to be right.
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Federal funds rate. Source: Federal Reserve Economic Data (FRED).