Waller Muddies Outlook for September Rate Hike

Federal Reserve Governor Christopher Waller said that the upcoming inflation report will largely determine whether he supports an interest rate hike later this month or not. The government will release August inflation figures on September 11, and if the report shows inflation continues to cool, Waller would be inclined to keep the Fed's benchmark interest rate unchanged.

However, if inflation comes in hot, Waller said he would consider a rate hike. Borrowing costs are only 'slightly restricting' consumer and business demand, according to him. He added that it may not take much acceleration in inflation to nudge him into supporting a rate hike.

This statement has muddied the outlook for a potential rate hike later this month. Waller is an outspoken member of the Fed's seven-person governing board. His remarks have led to a decline in stock prices and a fall in bond yields, as investors had been raising the odds of a rate hike in September.

The Fed's Chair, Kevin Warsh, has also expressed concerns that price increases are still too high. He said last week at the Fed's annual economic symposium in Jackson Hole, Wyoming, that inflation had not shown sufficient improvement and that the central bank might have 'more work to do'. This suggests that a rate hike may be needed.