Federal Reserve Governor Christopher Waller has a message for anyone trying to decode the Fed’s next move: stop reading the tea leaves and start reading the data.

Speaking at a Bank of Italy conference on July 6, Waller argued that he doesn’t need to say much about where rates are headed because he has a clearly defined reaction function. In English: if you know what economic indicators he’s watching and how he’ll respond to them, you already know what he’s going to do.

Forward guidance is more art than science

Waller’s core thesis is deceptively simple. Forward guidance, the practice of central bankers telegraphing future rate decisions, works best when it stays flexible. Lock it into rigid commitments and you get problems.

He pointed to a specific historical example. The FOMC’s 2020 statement tied rate liftoff to specific inflation thresholds, and when prices surged in 2021, that rigid language created a bottleneck. The Fed found itself boxed in by its own words while inflation ran hot.

The lesson, according to Waller: overspecific guidance can delay timely policy adjustments. He characterized the entire practice as “more art than science.” The implication is that a well-communicated reaction function, one that links policy actions to key indicators like inflation and employment, can substitute for explicit forward guidance entirely.

In a May 2026 speech, Waller advocated for eliminating the Fed’s easing bias, noting that core inflation measures were running around 3.8% earlier in the year. That’s nearly double the Fed’s 2% target, which makes preemptively signaling rate cuts a tough sell.

Waller’s quiet crypto thesis

While his July 6 speech focused on monetary policy mechanics rather than digital assets, Waller has characterized stablecoins and tokenized assets as tools for extending the dollar’s global reach beyond traditional banking channels.

That framing matters. Instead of viewing digital assets as threats to monetary sovereignty, Waller sees certain categories, particularly dollar-denominated stablecoins, as reinforcing the greenback’s dominance. For an industry that has spent years navigating regulatory hostility from various corners of Washington, having a sitting Fed governor articulate a constructive vision for digital assets is significant.