Federal Reserve Chair Waller signals "zero tolerance" for persistent high inflation, and will discuss using interest rate tools when necessary.

Federal Reserve Chair Christopher Waller, in his first appearance before Congress, stated that the Fed has a "zero-tolerance" stance on persistently high inflation, noting that the central bank’s failure to keep inflation above its 2% target over the past five years amounts to a dereliction of duty. He stressed the Fed’s assessment will not shift based on a single month of improved CPI data. On monetary policy, Waller said interest rate tools remain part of the Fed’s policy toolkit, and he will discuss with the Federal Open Market Committee (FOMC) when and to what extent these tools should be deployed to combat inflation, though he provided no forward guidance on future interest rate paths. Markets view this as the first time since Waller rejoined the Fed in May this year that he has publicly acknowledged the possibility of tightening monetary policy if necessary. Additionally, Waller emphasized the Fed will maintain its independence when setting interest rate policies, free from political influence. He also noted multiple reform working groups have been launched to drive adjustments to the Fed’s economic analysis, policy formulation and communication mechanisms, marking the start of a "new chapter for the Federal Reserve."