Federal Reserve Governor Christopher Waller said on Thursday that he is inclined to keep US interest rates unchanged at the central bank's September 15-16 meeting if August data confirm that inflation is continuing to ease. He added that a hotter reading could instead lead him to support a rate increase, making the coming inflation report pivotal for businesses, borrowers and financial markets.
Waller said inflation remains meaningfully above the Federal Open Market Committee's 2 percent goal, but recent figures show emerging disinflation. Annual personal consumption expenditures inflation stood at 3.7 percent in July and the core measure at 3.3 percent, while three-month core inflation slowed to 3.05 percent from 4.76 percent in February, according to his Federal Reserve remarks.
The governor described economic activity and employment as solid. Real gross domestic product expanded at a 1.8 percent annual rate in the first half of 2026, private domestic demand rose 3 percent, and monthly job creation averaged 60,000 through July. Unemployment was 4.1 percent, leaving inflation rather than labor weakness as the principal issue shaping his vote.
Financial markets reacted quickly to the conditional signal. Reuters reported that traders reduced the implied probability of a September rate increase to about 50 percent from roughly 63 percent a day earlier. The S&P 500 gained 1.1 percent, the Dow rose 1.2 percent and the Nasdaq added 1.4 percent, while the two-year Treasury yield fell to 4.34 percent from 4.39 percent.
The debate follows Chair Kevin Warsh's warning at Jackson Hole that inflation had not improved sufficiently, which had raised expectations of another increase and helped push longer-term borrowing costs higher. Waller said current policy only slightly restrains demand, while identifying energy prices, technology-goods demand associated with artificial intelligence, tariffs, military conflicts and trade policy as continuing sources of uncertainty.
The August employment report and the September 11 consumer-price report will arrive before policymakers meet. Waller expects the labor market data to remain broadly stable, so the inflation release will carry greater weight in his decision. His position does not commit the wider committee, but it shows that a September increase is not assured and that incoming evidence could determine the outcome.
Comments