Fed's Waller Signals Rate Hold or Hike Decision Based on Inflation Data

Christopher Waller, Federal Reserve Governor, says inflation remains above the Fed's 2 percent target. He notes that recent data show signs of disinflation, which could support keeping interest rates unchanged at the September meeting.

The July core PCE rose 0.2 percent, driven mainly by nonmarket services. Waller expects real GDP to grow just over 2 percent in 2026, driven by strong AI-related business investment and consumer spending.

Waller says the Fed may still raise interest rates at its September meeting if August inflation data show that the recent improvement does not last. He notes that the FOMC policy hinges on August inflation data, with a rate hold likely if progress toward 2 percent persists, but a hike possible if inflation accelerates.

The labor market and overall activity remain in good shape, according to Waller, leaving inflation as the main factor shaping his view on the appropriate stance of monetary policy. He says he is watching whether longer-term public inflation expectations begin to rise, and warns the FOMC should be ready to respond if inflation progress reverses.