Fed’s Christopher Waller on War-Related Inflation, Jobs, Private Credit
Speakers
Christopher Waller — Governor, Federal Reserve Board
— Chopping Block co-host
Summary
- Oil Shock is Transitory: Waller explicitly categorizes the current spike in gasoline prices due to Middle East conflict as a "one-off" supply shock rather than a permanent inflationary driver. He compares it favorably to the 1970s, suggesting it will "unravel" quickly.
- Labor Market Fragility: Despite a recent "robust" January print, Waller remains concerned about the "low hire, low fire" dynamic. He views the labor market as fragile and concentrated in only a few sectors (8% of the economy), maintaining a bias toward rate cuts if broader weakness appears.
- Tariff Fears Overblown: Contrarian view that tariff risks are "to the downside" (meaning less impact than expected). He predicts deals will be made rather than widespread implementation, suggesting inflation fears from tariffs are misplaced.
- Private Credit Defense: Waller dismisses the narrative of a systemic Private Credit bubble. He attributes recent headlines (redemptions/failures) to idiosyncratic fraud rather than structural rot, signaling no imminent regulatory crackdown or bailout need.
Trade Ideas
Waller states, "I've been more worried about the labor market versus the inflation risk... I've always believed inflation was going to come back down once tariff affects pass through." He also notes regarding oil: "For us, thinking about policy... this is unlikely to cause a sustained inflation." The bond market often sells off (yields up) on headline inflation fears (oil spikes, tariff talk). Waller is signaling that the Fed will *look through* these supply-side shocks. His reaction function is asymmetric: he will ignore high headline inflation caused by oil/tariffs but will cut rates aggressively if the "fragile" labor market cracks. LONG. You are buying the Fed's willingness to cut rates despite temporary inflationary noise. If oil prices do not "unravel" and instead trigger a wage-price spiral, the Fed will be forced to pivot back to hawkishness.
"I still have a view that all the tariff risk is to the downside... I don't see big increases in tariffs spread all over the place... Deals are going to potentially get made." Importers and Retailers have likely been battered by fears of a "new round of tariffs" (margin compression). Waller suggests these tariffs are negotiating leverage ("deals made") rather than permanent policy. If tariffs don't happen or are significantly lower than feared, these stocks re-rate higher as margin compression fears vanish. LONG. A contrarian bet against the consensus "Trade War" narrative. The administration ignores economic logic and implements blanket tariffs regardless of deals, crushing importer margins.
When asked about "headlines about another fund... struggling to meet redemptions," Waller responds: "I don't see big, really big widespread problems... couple of cases of certainly fraud... I don't think as a whole the private credit market is in any serious trouble." The market currently fears a systemic liquidity crisis in Private Credit (the "shadow banking bubble" narrative). Waller, a key regulator, explicitly isolates these issues as "fraud" rather than systemic failure. This greenlights the major, high-quality asset managers (Blackstone, KKR, Apollo) to continue gaining market share as fears of a regulatory crackdown or sector-wide collapse dissipate. LONG. The "Fed Put" effectively exists for the asset class structure, as they aren't seeing systemic risk. Discovery of contagion where major players actually have bad collateral, disproving Waller's "idiosyncratic" view.
Up Next
This Bloomberg Markets video, published March 06, 2026, features Christopher Waller discussing TLT, IEF, TGT, NKE, WMT, FIVE, BX, KKR, APO, ARES. 3 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Christopher Waller · Tickers: TLT, IEF, TGT, NKE, WMT, FIVE, BX, KKR, APO, ARES