Federal Reserve Governor Christopher Waller said his next decision on interest rates will be “heavily influenced” by August inflation data due next week, adding it may not take much to nudge him toward supporting a rate hike at the Fed’s upcoming policy meeting.
“If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level,” Waller said Thursday in remarks prepared for an event hosted by Reuters. “But if inflation comes in hot, I would consider a rate hike.”
Describing current policy as slightly restraining the economy, Waller added, “It may not take much acceleration in inflation to nudge me into supporting tighter policy. If there is evidence that progress toward 2% inflation reversed in August, a small adjustment in our stance would help ensure that it resumes.”
Still, he offered some optimism that price pressures were showing signs of improvement.
“While inflation remains meaningfully above the Federal Open Market Committee’s 2% goal, recent data suggest we are finally seeing some signs of disinflation,” he said.
Fed officials will meet again on September 15-16 in Washington after leaving rates steady for five straight meetings this year. Investors currently see more than a 60% chance of a rate hike, based on federal funds futures pricing.
In July, three voting members of the FOMC dissented in favor of a quarter-point rate hike, and officials have continue to send mixed signals on their outlook for the economy.
Policymakers will receive new employment data on Friday and consumer price data on Sept. 11.
See more: QuantStreet September 2026 Letter: Interest Rate Worries
Waller said he expect the jobs data due tomorrow to confirm that the labor market is in a satisfactory state.
At the Fed’s annual economic symposium in Jackson Hole, Wyoming, Chairman Kevin Warsh said it’s not clear that broad financial conditions are currently restrictive and officials have “work to do” if they are not confident underlying inflation is moving toward the Fed’s 2% goal.
Governor Michael Barr said Tuesday the central bank should be prepared to raise interest rates this month if inflation fails to subside, warning price pressures are at risk of becoming entrenched after being above target for more than five years.
Meantime, New York Fed President John Williams said there’s evidence that inflation is continuing to ease as the impact of tariffs fades while higher energy prices are not spreading to other services.
Communications Strategy
Waller used his speech to map out his communication strategy to the public, which he said revolves around three objectives: communicating his current view on monetary policy, his outlook for monetary policy and, under certain circumstances, the use of forward guidance to signal the trajectory for interest rates.
The remarks highlighted differences between his and Warsh’s approach to communications. Warsh has promised to overhaul how and how much the central bank provides signals to the public and investors by eliminating forward guidance and seeking to trim the volume of speeches and other communications from the central bank.
The chairman’s strategy drew a rebuke from bond investors in July who said Warsh didn’t offer enough insight into his views on the economy. Warsh last week used his speech at Jackson Hole to map out his broader views, without signaling his next move on interest rates.
Waller said by communicating his outlook, businesses and households are offered a clearer picture of where policy may be headed. He also said there is a role for forward guidance.
“I agree with Chairman Warsh that forward guidance isn’t appropriate now or in many other situations,” Waller said. “But when it is truly needed, I believe it should be used.”
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