Waller open to rate hike if August inflation progress stalls
Federal Reserve Governor Christopher Waller indicated he favors keeping the policy rate unchanged at the September 15–16 FOMC meeting if disinflation continues. However, he cautioned that an acceleration in August inflation could prompt him to support an immediate rate increase.
Conditioning the September vote
Waller noted that while inflation has exceeded the 2 percent target for over five years, recent prints show encouraging progress.
Three-month core PCE inflation dropped from 4.76 percent in February to 3.05 percent in July, though 12-month core remains elevated at 3.3 percent.
With the real economy expanding at a 1.8 percent annual pace in the first half of 2026 and unemployment at 4.1 percent, Waller argued that monetary policy is only slightly restrictive.
He stressed that his upcoming policy vote depends directly on incoming August data: continued disinflation justifies holding the policy rate, but a hot inflation reading would warrant a rate hike to ensure progress resumes.
The reaction function and the strike zone
Reflecting on central bank communication, Waller rejected unconditional forward guidance in the current environment, reserving that tool primarily for the effective lower bound.
Instead, he framed policymaking around a conditional reaction function, comparing himself to a baseball umpire establishing a strike zone for markets and businesses.
He also dismissed concerns that capital-intensive artificial intelligence spending is artificially propping up gross domestic product growth.
Transparency without rigid promises
Waller’s readiness to raise rates provides a vital disciplinary anchor against premature easing bets.
By laying out clear if-then conditions rather than rigid commitments, he restores genuine data dependence to policy communication.
This pragmatic stance preserves operational flexibility while keeping inflation risks firmly in focus.