“Give disinflation a chance. We can wait one meeting.” Federal Reserve Governor Christopher Waller used a John Lennon line on Sept. 3 to argue against raising interest rates at the Fed’s September 15-16 meeting.
The pitch came with a condition. “If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said. In other words, the August inflation reports have to cooperate. August CPI and PPI both land on September 11, and MPA reported that they will in effect decide how he votes.
Why he is willing to wait
Waller did not pretend prices are under control. He called inflation “meaningfully above” the Fed’s 2% target, and 24/7 Wall St. noted that July data showed headline inflation near 3.7% and core near 3.3%.
His case rests on direction. Three-month core PCE inflation has come down from 4.76% in February to 3.05% through July, a drop he described as “encouraging.” He also argued that a hike now would not do much: “Hiking 25 basis points, one meeting right now, is not going to bring the CPI down to 2%.”
The backdrop he cited is mixed but steady. Real GDP grew at an annualized 1.8% in the first half of 2026, unemployment is 4.1%, and job creation has averaged 60,000 a month through July.
Not a promise
Waller sees policy as only slightly restrictive, according to 24/7 Wall St., so if inflation proves stubborn he would not need long before backing further tightening. The hold he floated is a bet on one more good data release, nothing firmer.
His tone differed from that of Fed Chairman Kevin Warsh, who sounded more hawkish at Jackson Hole the week before. Other governors also appear to be leaning toward hiking.
Markets heard the dovish half. After Waller spoke, CME Group’s FedWatch tool showed the probability of a September hike falling by roughly 12 percentage points to about 54.6%, per 24/7 Wall St.; MPA put the drop at about 15 points, to 48.4%. Bond yields eased. Energy remains a risk, with diesel crack spreads near record levels above $100 per barrel, and services inflation has been slow to cool.
Sources
- The Fed's Waller Says He'd Hold Rates Steady – But His "If" Is Doing a Lot of Heavy Lifting – 24/7 Wall St.
- Waller leans toward hold as September rate decision nears | MPA
