Expectations are for a decline for the month, mostly on the sharp reversal in gas prices. That would bring the year-over-year rate back down below 4%. 

Core inflation, which excludes food and energy, is expected to rise two-tenths, with the annual rate around 2.8%.

That said, the main event will come after the inflation report tomorrow morning, when the new Fed Chair delivers his first testimony to Congress.

Since Warsh chaired his first Fed meeting last month, the "Fed speak" has been notably quiet.

Under the old Fed, a policy meeting was followed by a parade of Fed governors and regional presidents, out in force, trying to steer the market to align with their view. 

This time, almost nothing.

The public appearances have been about bank regulation, AI, and ceremony. Not the path of policy. And, as we've discussed, that silence is consistent with what Warsh told us his Fed would be.

Less telegraphing. Less message management. More independent thinking. More dissent.

That brings us to Waller's speech today. 

Remember, Chris Waller was a top candidate for Fed Chair. His speech today was titled "Monetary Policy at a Crossroads."

He said tomorrow's CPI report and Wednesday's PPI report will help him determine the appropriate path for policy.

If core inflation cools, he wants to see "several months" of it before concluding the trend has changed. If it comes in hot, the Fed should consider tightening "in the near term."

So, Waller gave the market a reaction function.

Cool number, keep holding. Hot number, think about hiking. Several good months, maybe the direction changes. This is akin to the Powell-led Fed telling us if the "labor market cracks" they'll cut. 

That's the old Fed.

It's forward guidance involving the "conditions" for action.

Instead of telling us what the Fed will do, it tells us which outcomes will make the Fed do something. Either way, the market worries more about trading the Fed, and what they'll do, rather than positioning for what the economy is doing. 

Now, remember what Warsh did at his first meeting. It tells us today's Waller speech was just one vote, not the voice of the institution. 

Warsh let his colleagues submit their rate forecasts last month, the famous dots. He declined to submit one himself.  

He let them show their work, then pointed out they had done it in pencil, with big erasers (i.e. they don't fully believe their own forecasts).

And in that first meeting (and post-meeting press conference) he then put the full machinery that produces those forecasts under formal review.

With that, last week, in advance of Warsh's first Congressional testimony as Fed Chair (tomorrow and Wednesday), the Fed announced the leadership and objectives of the five task forces — and then released a 77-page semiannual report on the state of the economy, within which Warsh's Fed criticized the timeliness of the data the Fed depends on.

Which brings us back to tomorrow's number.

An inflation print driven by an oil shock is not the same as one driven by an explosion in money supply (the 2020-2021 analogue the media and some Fed members are anchoring to). 

The old Fed waits for the number. The Warsh-led Fed should ask what produced it.