Christopher Waller leans toward keeping the Fed rate unchanged in September
Federal Reserve Governor Christopher Waller said he is inclined to support keeping the target range for the federal funds rate at its current level at the Fed meeting on September 15–16. He is prepared to support such a decision if upcoming inflation data bring no surprises, CNBC reports.
Expectations for new data
Waller acknowledged that inflation is still “meaningfully above” the Fed’s 2% target. At the same time, he said recent developments indicate the emergence of signs of disinflation. The official noted that the impact of tariffs was likely limited, while higher energy prices had no significant effect on other parts of the economy.
Before the Fed meeting, the U.S. Bureau of Labor Statistics is due to release consumer and producer price indexes. Waller stressed that he could change his position if these indicators show a shift in inflation dynamics.
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Conditions for tighter policy
In Waller’s assessment, current monetary policy is restraining aggregate demand only slightly. He said that even a small acceleration in inflation could lead him to support tighter policy. If August data show that progress toward bringing inflation closer to 2% has reversed, a small adjustment in the Fed’s stance could help restore it, he said.
Assessment of the inflation trend
In July, headline inflation stood at 3.7%, while core inflation was 3.3%. Waller believes that underlying inflation trends are better than core inflation readings reflect, and that year-over-year data are not the best guide for assessing the current situation. According to him, the three-month inflation rate for the measure preferred by the Fed has fallen from 4.76% in February to 3.05% now.
Waller’s position differs from recent statements by Fed Chair Kevin Warsh. At the Jackson Hole symposium, Warsh cautioned that softer monthly inflation readings do not indicate a significant improvement in underlying trends. Following these remarks, markets priced in a high probability of a rate increase at the upcoming meeting.
