Federal Reserve Governor Christopher Waller stated that the recent downward trend in inflation is encouraging, but whether to continue raising rates at the September meeting will depend on the August inflation data. If price pressures continue to ease, he favors maintaining the current interest rate; if the data strengthens again, another small rate hike remains an option.
Wallers says he is willing to observe inflation further.
Waller, in an interview at a Reuters event, said recent data indicate that U.S. inflation is moving closer to the Fed’s 2% target. According to him, if this trend continues, he would be willing to support holding rates steady at the Federal Open Market Committee meeting on September 15–16.
He noted that three-month core inflation, excluding volatile items, had fallen to 3.05% by July, down from 4.76% in February. This shift indicates that short-term price pressures have eased, providing policymakers with more room to observe.
The decision in September still relies on August data.
However, Waller did not rule out the possibility of another rate hike. He stated that if subsequent data continue to improve toward the 2% target, he supports holding rates steady; but if August inflation exceeds expectations, it could be sufficient to justify another small rate increase.
This statement is more moderate compared to the previously more hawkish internal discussions. The July meeting minutes previously released showed that some officials were still debating whether further rate hikes would be necessary if inflation remained elevated.
Oil prices remain an upside risk.
The market reacted quickly. According to Reuters, after Waller’s remarks, traders lowered their bets on a September rate hike, U.S. Treasury yields declined, and the dollar weakened.
Waller also noted that oil prices and other energy costs remain upward risks to inflation. If energy prices continue to rise, transportation and production costs could increase, thereby disrupting the Fed’s efforts to bring inflation back to 2%. For the crypto market, changes in interest rate expectations will continue to influence the performance of risk assets such as Bitcoin.