US TSY FUTURES: BLOCK: Sep'25 SOFR Buy

• Treasury futures have tempered the post-ADP bounce off lows following softer than expected weekly jobless claims, continuing claims higher w/ prior down-revised.
• The Mar'25 10Y contract trades -2.5 at 108-03 after breaching round number support to 107-28.5 low earlier, 10Y yield currently at 4.7035 +.0185 after tapping 4.7280% high, 2s10s at 42.486 +3.514.

Gov Waller's speech (called "Challenges Facing Central Bankers") Wednesday is largely in line with Chair Powell's post-December press conference commentary: further rate cuts are expected if the economy unfolds as expected. But Waller is more forceful on the outlook for cuts than Powell (and apparently more dovish than the median FOMC voter who sees just 50bp of cuts in 2024).

• Waller says: "minimal further progress [on inflation] has led to calls to slow or stop reducing the policy rate. However, I believe that inflation will continue to make progress toward our 2 percent goal over the medium term and that further reductions will be appropriate." Note the "will be". Powell in contrast, albeit speaking for the FOMC as a whole: "we are at or near a point at which it will be appropriate to slow the pace of further adjustments".
• Like Powell, Waller remains confident that inflation is on track to reach 2%: "I believe that inflation will continue to make progress toward our 2% goal over the medium term and that further reductions will be appropriate". He goes through his thinking on inflation trends, including that " progress has been uneven, but disinflation is more apparent if one smooths through the recent upticks" ... and  "inflation in 2024 has largely been driven by increases in imputed prices, such as housing services and nonmarket services, which are estimated rather than directly observed and I consider a less reliable guide to the balance of supply and demand across all goods and services in the economy." In other words, no concern from recent inflation data.
• One major takeaway is that Waller doesn't see tariffs as being inflationary ("If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy.") He doesn't say whether his December forecasts incorporated assumptions of future government policy, but clearly this is the dovish angle on the tariff debate. The December meeting minutes will be interesting to read for any other participants' takes on the tariff impact.
• Unlike Powell, he does not describe his view of the current state of policy restrictiveness: Powell in December said after 100bp of rate cuts that "policy is still meaningfully restrictive"; Waller had said before deciding whether to cut in December that policy was "significantly restrictive".