Key facts
- Federal Reserve Governor Christopher Waller is open to holding interest rates steady if August inflation data shows cooling.
- Waller stated he would support a rate hike if inflation proves to be 'hot'.
- He believes current interest rates are only slightly restricting aggregate demand.
- Inflation remains above the Fed's 2% target but is showing slow progress.
- Other Fed officials, including Jeffrey Schmid, Beth Hammack, and Austan Goolsbee, have also voiced concerns about persistent inflation.
Federal Reserve Governor Christopher Waller indicated that he is inclined to support keeping interest rates unchanged at the central bank's next policy meeting if upcoming data confirms inflation pressures are cooling. In prepared remarks for a Reuters NEXT Newsmaker event, Waller stated that his decision would be heavily influenced by August inflation figures.
If there is continued progress toward the Federal Reserve's 2% inflation goal, Waller said he is willing to support holding the policy rate at its current level. However, he cautioned that a path to higher interest rates remains in play, warning that if inflation comes in 'hot,' he would consider a rate hike at the September 15-16 meeting. He noted that the current 3.50%-3.75% Fed policy rate is only slightly restricting aggregate demand and that it 'may not take much acceleration in inflation to nudge me into supporting tighter policy.'
Waller acknowledged that inflation is 'meaningfully above' the 2% target but added that it 'is making slow but continued progress on reaching' that goal. Investors have been pricing in solid odds of a quarter-percentage-point rate hike at this month's Fed meeting. In recent weeks, various central bank officials have signaled ongoing concern about inflation, with some advocating for rate hikes and others expressing openness to action.
Speaking at the Jackson Hole economic symposium, Fed Chairman Kevin Warsh indicated that if inflation pressures did not moderate, action from the Fed to ensure they did was likely. Waller emphasized that his main policy focus is on inflation, given the solid performance of the overall economy and the relative stability of the labor market. He believes that some factors driving recent inflation, such as elevated energy costs linked to the war in Iran and shifting tariffs under the Trump administration, pose additional risks.