Speaking to Reuters on Thursday, Christopher Waller said he is inclined to keep the federal funds rate where it is at the September gathering if upcoming inflation reports do not spring a surprise. He acknowledged inflation remains "meaningfully above" the Fed's 2% goal but said recent patterns "suggest we are finally seeing some signs of disinflation." He also said tariff effects look limited and that pricier energy has not significantly spilled over into the broader economy.
Waller argued that annual figures "are not the best guide for where inflation is today." He cited July's headline reading of 3.7% and core at 3.3%, then emphasized shorter-run momentum: by the Fed's preferred gauge, the three-month inflation pace has slowed to 3.05% from 4.76% in February. "That is a considerable improvement, and the speed of this downward trajectory is encouraging," he said.
Waller's tone stood apart from Chairman Kevin Warsh's remarks less than a week earlier at the Federal Reserve's annual symposium in Jackson Hole, Wyoming. Warsh said that softer recent monthly readings "do not tell me that underlying trends have meaningfully improved," adding, "we have work to do" if inflation does not cooperate. Markets heard that as a firmer stance on rates and swiftly marked up the odds of an increase at the next meeting.
Waller offered a different read on the backdrop and said, "I judge that policy is currently only slightly restricting aggregate demand." He added that if the incoming evidence before the Sept. 15-16 meeting pointed the wrong way, he could shift.
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Before policymakers convene, the key inflation checks on deck are next week's consumer price index and producer price index from the Bureau of Labor Statistics. Waller said, "If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting." He also cautioned that "it may not take much acceleration in inflation to nudge me into supporting tighter policy," and that "if there is evidence that progress toward 2% inflation reversed in August, a small adjustment in our stance would help ensure that it resumes."
Bottom line for everyday finances: the next couple of inflation prints will heavily influence whether borrowing costs hold steady or rise from here. That affects everything from credit card APRs to future mortgage affordability, so the CPI and PPI updates are the ones to keep an eye on.
