Fed’s Waller Says He Would Favor September Hold if August Inflation Cools

Federal Reserve Governor Christopher Waller said on September 3 he would lean toward keeping interest rates unchanged at the Federal Open Market Committee’s September meeting if August inflation data show further easing in price pressures.

In remarks released ahead of a Reuters event, Waller offered a somewhat more dovish assessment of recent inflation trends than markets have. He said the effects of higher tariffs have already been substantially reflected in consumer prices, and that higher energy costs after the Middle East war have not broadly lifted prices across other categories.

He also said underlying inflation is moderating. Waller cited the three-month increase in the core personal consumption expenditures price index, which excludes food and energy, falling to 3.05% in July from 4.76% in February, calling it “considerable improvement.” He acknowledged, however, that overall inflation still remains above the Fed’s 2% target.

His remarks were taken as a signal pushing back against strengthened expectations for another rate increase. Markets had increasingly priced in a September hike after Fed Chair Kevin Warsh signaled in a Jackson Hole speech that further tightening remained possible.

Rate expectations shifted quickly after Waller’s comments. On CME FedWatch, the probability of a hold in September rose to 49.6% from 37.6%, while the odds of a 25-basis-point increase fell to 50.4% from 62.4%.

Waller did not rule out another rate increase altogether. He said he could still support additional tightening if August inflation data show price pressures strengthening again.