We’ve come a long way since late November. Six whole months, in fact.

Half a year ago tomorrow, Chris Waller said he was “increasingly confident” that Fed policy was “well-positioned” to slow the US economy and “get inflation back to 2%.”

During the same fateful remarks to the American Enterprise Institute, Waller said he could see the Fed starting to cut rates in “three months, four months [or] five months.” Contingent, of course, on inflation outcomes.

At the time, the market was priced for around ~88bps of Fed easing in 2024. So, three quarter-point cuts plus even odds of a fourth. By late January, traders had pushed 2024 rate-cut pricing to ~175bps, leaning into the so-called “Waller doctrine,” which was in essence just a rules-based policy prescription that calls for cutting rates as inflation recedes to avoid passive tightening through the real rates channel —  “cutting to stand still,” so to speak.

Unfortunately, disinflation progress came to a halt in Q1, effectively voiding the rationale for Waller’s insurance cuts. Now here we are on the verge of June with Neel Kashkari suggesting the Fed might just hold terminal forever.

Kashkari didn’t use that word (“forever”) on Tuesday, but he did say the following:

We could sit here for as long as necessary until we get convinced that inflation is sustainably going back down to 2%.

There you go. The Fed can do this all day folks, where “this” means nothing. And do note: The Waller rationale for lowering rates cuts both ways (get it?). If inflation re-accelerates meaningfully, a static nominal policy rate with fall in real terms in what would amount to passive easing.

And that’s to say nothing of the distinct possibility that current policy settings aren’t actually restrictive in the first place, something else Kashkari brought up Tuesday. Although policy’s restrictive by most measures, it’s not by all of them, and short-term neutral may indeed be higher, he said.

Critics would invariably ask what Kashkari means by “most” measures. Financial conditions are as easy (or easier) than they were prior to the first Fed hike on at least three widely-cited gauges (Goldman’s, Bloomberg’s and, amusingly, one of the Fed’s own indexes).

Kashkari’s remarks were notable, which is to say I’m not merely documenting Neel’s musings to fill the post-holiday market news void in the US. He also said Tuesday that although he agrees with Jerome Powell that another hike isn’t the most likely scenario, it can’t be ruled out. As for his June dot, Kashkari said “it certainly won’t [reflect] more than two cuts.”

In his pivotal November 28 speech, Waller conceded there was still “significant uncertainty” around the economy. “I cannot say for sure whether the FOMC has done enough to achieve price stability,” he told the audience. “Hopefully, the data we receive over the next couple of months will help answer that question.”