Federal Reserve Governor Christopher Waller on Thursday said he is leaning toward keeping the central bank’s interest rates unchanged at the September meeting, provided there are no unexpected inflation data surprises.
Statements by Christopher Waller, which appear to contrast with views expressed last week by former Fed official Kevin Warsh, reflect his confidence in current inflation trends. He noted that the impact of tariffs had likely been minimal, and higher energy prices had not significantly affected other sectors of the economy.
Although Christopher Waller acknowledged that inflation is “significantly above” the Fed’s 2% target, he said recent trends “suggest that we are finally seeing some signs of disinflation.” “If this is confirmed in the data coming out over the next two weeks, I will be inclined to support keeping the federal funds rate target range at its current level,” he said in an interview with Reuters.
Waller Allows for Possible Shift in Stance
At the same time, the official added that he could change his position if signals emerge before the September 15–16 meeting. The key inflation data the Fed will receive before the meeting are the consumer and producer price indexes, which the Bureau of Labor Statistics will release next week.
“I think monetary policy is only mildly restrictive on aggregate demand right now, and even a slight acceleration in inflation could push me toward supporting a tighter policy,” Waller said. He added: “If August shows evidence that progress toward 2% inflation has reversed, a slight adjustment in our stance will help ensure that progress resumes.”
Diverging Inflation Assessments
These remarks came less than a week after Kevin Warsh, in a speech at the Fed’s annual symposium in Jackson Hole, Wyoming, said that the recent lower monthly inflation figures “do not indicate a significant improvement in underlying trends.” He added that if trends do not improve, “we still have more work to do.” Although these comments differed little from the chair’s previous statements on inflation, markets interpreted them as a signal favoring a more hawkish stance on rates and quickly priced in a high probability of a rate hike at the upcoming meeting.
However, Christopher Waller holds a different view. While headline inflation in July was 3.7% and core inflation was 3.3%, he noted that underlying trends are actually “better than the headline numbers suggest,” and that annual figures “are not the best guide to where inflation is right now.” He pointed out that the three‑month inflation rate, based on the Fed’s preferred gauge, has fallen from 4.76% in February to 3.05% currently.
“That is a significant improvement, and the pace of this decline is encouraging,” he said.
Source: CNBC
