Waller backs further rate increases as core inflation hits 3 percent
Federal Reserve Governor Christopher J Waller backed further rate increases, conditional on incoming data, in Istanbul on October 8, 2026. The September 16 increase of 25 basis points brought the federal funds target range to 3.75-4 percent after nine months unchanged.
Inflation displaces employment concerns
Waller said the Federal Open Market Committee (FOMC) cut rates 75 basis points across three meetings from September to December 2025 as employment weakened.
It held rates on July 29, 2026, but persistent inflation drove September's increase.
He cited Middle East energy costs potentially lasting through 2027, AI investment raising high-tech consumer prices and tariff risks.
Monthly core PCE inflation was 0.1 percent in June and July, with July revised from 0.2 percent; August recorded 0.25 percent monthly and 3 percent annually.
Annual core inflation has stayed around 2.5-3.0 percent since spring 2024, above the 2 percent target.
September employment remained stable.
Waller sees stronger activity and risks of rising inflation expectations, making inflation the near-term policy focus.
Dots point beyond September
The September Summary of Economic Projections showed 16 of 18 participants anticipating another increase across 2026's two remaining meetings; four anticipated two.
Eight projected rates 50 basis points higher at end-2027.
Waller cautioned that annual dots can combine earlier increases with later cuts.
October 7 futures implied an 85 percent probability of at least one increase by December and nearly 20 percent of two.
By March 2027, probabilities were nearly 80 percent for at least two and 33 percent for three or more.
Waller described projections as signals, not binding guidance.
Direction without a commitment
Waller's distinction makes the projected destination informative but not binding.
His hypothetical three 25-basis-point increases over six months leaves timing and size open, unlike fixed guidance spanning five meetings.
The practical limit is explicit: additional increases depend on data and need not occur at consecutive meetings.