Federal Reserve Governor Christopher Waller said on Thursday the central bank could maintain its benchmark interest rate at the September 16-17 Federal Open Market Committee meeting if disinflationary trends persist. Waller’s remarks follow a shift in market pricing, which had earlier assigned roughly 60-66% odds of a rate hike after hawkish comments from Fed Chair Kevin Warsh at Jackson Hole, before easing to near-even odds after Waller’s comments.
Speaking to Reuters, Waller noted that current policy remains only moderately restrictive on aggregate demand, adding that a further acceleration in inflation may not be required to prompt a more restrictive stance. He described the pace of disinflation since February as "encouraging" and welcomed an upcoming methodological adjustment by the U.S. Department of Commerce to tariff estimation in financial services as a "welcome measurement correction."
Market expectations for September have fluctuated alongside incoming data. Core Personal Consumption Expenditures inflation stood at 3.3% on a 12-month basis in July, well above the FOMC’s 2% target. The August jobs report, due September 4, and the August Consumer Price Index, slated for September 11, will be key inputs for the Fed’s decision. The federal funds rate target range remains at 3.50%-3.75%.
HSBC revised its U.S. Treasury yield forecasts for year-end 2026, lifting the 2-year yield to 4.20% from 3.85% and the 10-year to 4.65% from 4.30%. Goldman Sachs maintained its year-end S&P 500 target at 8,000 points and expects core CPI and PCE inflation to register around 0.2% in August.
