Federal Reserve governor Christopher Waller has said he could support leaving US interest rates unchanged at the central bank’s September meeting if forthcoming data shows inflation continuing to ease.
Speaking at a Reuters NEXT Newsmaker event in Washington on Thursday, Waller said the latest figures on August inflation would be central to his decision ahead of the Federal Open Market Committee meeting on September 15 and 16.
“If there is continued progress toward our 2% goal, then I am willing to support holding the policy rate at its current level,” he said.
However, Waller also left open the possibility of a rate increase if price pressures strengthen. “If inflation comes in hot, I would consider a rate hike,” he said, warning that monetary policy was currently only “slightly restricting aggregate demand”.
The Federal Reserve’s policy rate is currently set in a range of 3.50% to 3.75%. Waller said it might take only a modest acceleration in inflation to persuade him that tighter policy was needed.
Although inflation remains “meaningfully above” the Fed’s 2% target, Waller said it was making slow and continuing progress towards that goal. He added that the labour market appeared relatively stable and the wider economy remained solid, leaving inflation as his main policy concern.
Waller said higher energy prices and tariffs were not currently producing significant continuing inflationary pressure. He suggested that the effect of recent import tax increases had largely passed through the economy, while energy costs linked to the conflict in the Middle East did not yet appear to be spreading into other prices.
He nevertheless pointed to risks from elevated energy prices, higher technology goods costs linked to the artificial intelligence boom and the possibility of further tariff increases.
Financial markets reduced their expectations of a rate rise after Waller’s remarks. Traders were putting the odds of an increase at just above 50%, down from roughly 60% earlier in the day.
