Federal Reserve Governor Christopher Waller said on Thursday he would be open to leaving interest rates unchanged at the central bank’s September 15-16 policy meeting if upcoming inflation data shows further progress toward the 2% target.
Waller, speaking at a Reuters NEXT Newsmaker event in Washington, noted that the current federal funds rate range of 3.50% to 3.75% is only modestly restraining aggregate demand. He added that a significant acceleration in inflation may not be required to justify advocating for tighter monetary policy.
The Fed governor described inflation as still "significantly above" the 2% target but acknowledged it is "moving slowly but steadily" toward that goal. He emphasized that his decision will hinge on the August inflation reading, which will be released ahead of the policy meeting.
Market pricing adjusted following Waller’s remarks, with traders now assigning a slightly above 50% probability to a rate hike this month, down from about 60% prior to his comments. Investors had previously expected a 0.25 percentage point increase at the September meeting.
Waller’s stance contrasts with recent signals from Fed Chair Kevin Warsh, who said at the Jackson Hole economic symposium last week that the central bank would likely act if inflationary pressures fail to moderate. The Fed’s next policy decision is scheduled for September 15-16.
