Governor Christopher Waller says forward guidance can accelerate policy impact when used carefully
Federal Reserve Governor Christopher Waller called forward guidance a "valuable tool" on Monday. The remarks put him at measured odds with Chair Kevin Warsh, who has pushed the central bank toward a leaner approach to signaling its policy intentions.
Waller did not dispute that guidance can go wrong, but he stopped well short of endorsing a wholesale retreat.
Waller delivered his remarks at a Bank of Italy conference in Rome on July 6, weeks after Warsh, confirmed by the Senate in a 54-45 vote and sworn in on May 22, unveiled plans to overhaul how the Federal Open Market Committee (FOMC) signals its intentions to markets.
The two officials agree on the limits of forward guidance but diverge on how far the retreat should go, a distinction that carries direct consequences for mortgage professionals watching every Fed signal for clues about rate direction.
"I continue to believe that forward guidance can be a valuable tool that has, at times, significantly strengthened policymaking and will continue to be useful," Waller said.
When the Fed first steered investors toward coming rate hikes in the fall of 2021, market interest rates began rising before the central bank took any formal action. "When it works, forward guidance can change economic conditions more quickly than adjusting the policy rate alone," he said.
Where the two officials converge
Waller did not dispute that guidance can go wrong. He pointed to 2020 and 2021, when the Fed's commitment to near-zero rates effectively locked policymakers out of acting sooner — contributing to a delay in raising the federal funds rate until March 2022, even as inflation surged well past the 2% target and unemployment fell rapidly.
"If it is not flexible enough, it can hinder policy transmission. And, in some cases, it's best not to use it at all," he said.
That tension runs through Warsh's broader restructuring of how the Fed communicates with markets.
At his June 2026 FOMC debut, Warsh withheld his own dot plot submission and oversaw the removal of language that had signaled a rate cut was more likely than a hike, a move that rattled some market participants expecting more transparency, not less.
Marty Green, principal at Polunsky Beitel Green in Dallas, explained the underlying logic to Mortgage Professional America: "His point is that by giving forward guidance, the Fed impacts behavior which then they take into account to make their decision."
What brokers should watch Wednesday
Waller drew a firm line at silence, however. "As long as your reaction function is well defined and well understood you don't have to necessarily talk that much," he said. "But if your reaction function is not well defined — you need to speak."
That caveat matters. Five task forces Warsh is assembling to review Fed operations, including communications, are expected to report before year-end.
A more immediate signal arrives Wednesday with the release of the FOMC minutes from Warsh's first meeting as chair, which analysts say could carry unusual interpretive weight given the absence of explicit guidance in the post-meeting statement.
For loan originators and brokers, the practical backdrop has not changed much. The 30-year fixed-rate mortgage averaged 6.49%, according to the most recent Freddie Mac Primary Mortgage Market Survey.
Odeta Kushi, deputy chief economist at First American Financial Corporation in Santa Ana, California, told Mortgage Professional America that clarity from the Fed alone is unlikely to produce the relief the market needs.
"The more likely story for the second half of the year is volatility around a higher-for-longer range, rather than a meaningful decline in mortgage rates," Kushi said.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
