Federal Reserve Governor Waller: Inflation data supports the Fed's decision to raise rates in September, but there is no need for consecutive rate hikes.
BlockBeats news, October 8 — Federal Reserve Governor Waller wrote that the Fed's decision to raise rates in September was the result of multiple pieces of evidence accumulating over several months, rather than being driven by a single data point.
Waller recalled that the Fed cut rates by 75 basis points in succession from September to December 2025. However, in the first half of 2026, the labor market stabilized, inflation progress stalled, Middle East conflicts pushed up energy prices, AI buildout drove up tech consumer prices, and trade conflicts and new tariffs also brought upward pressure. After August inflation data came in above expectations, the Fed decided to raise rates in September.
Waller said the latest data reinforced the judgment of "stable employment, inflation too high." In August, core PCE rose 3% year-over-year, and since spring 2024 core inflation has broadly been in the 2.5%–3.0% range, above the 2% target. He emphasized: "At least in the near term, policy will focus on the inflation side of our mandate." Waller is not very worried that tightening policy will cause a severe slowdown, but he is worried that accelerating inflation will push up inflation expectations across the board.
As for the future path, Waller pointed to the possibility of further rate hikes, such as potentially raising by 75 basis points in the future, but he did not lock in the pace or magnitude, stressing that it depends on the data. September projections showed that 16 of 18 participants expected at least one more rate hike this year, while 4 expected two. The market sees an 85% probability of at least one rate hike before December, and nearly an 80% probability of at least two hikes by March 2027.
Waller said that if the data meet expectations, further rate hikes are expected, but they do not need to happen at consecutive meetings—they only need to be in place within an acceptable time frame.
