Fed Governor Waller: Inflation data supports the Federal Reserve’s decision to raise interest rates in September, but consecutive rate hikes are not necessary.

Federal Reserve Governor Christopher Waller published a statement saying the U.S. Federal Reserve’s decision to raise interest rates in September was the result of months of accumulated evidence, not driven by a single data point. Waller recalled that the Fed had cut rates by 75 basis points consecutively 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-related construction boosted high-tech consumer prices, and trade conflicts and new tariffs also created upward inflationary pressure. After August inflation data came in higher than expected, the Fed decided to raise rates in September. Waller said the latest data reinforced the judgment that "employment is stable while inflation remains too high". August core PCE rose 3% year-over-year; core inflation has hovered roughly between 2.5% and 3.0% since spring 2024, exceeding the Fed’s 2% target. He emphasized: "At least in the near term, policy will focus on the inflation side of our mandate." Waller is not overly concerned that policy tightening will cause a sharp economic slowdown, but he worries that accelerating inflation will push up inflation expectations across the board. Regarding the future path, Waller pointed to the possibility of further rate hikes, such as a potential 75-basis-point increase, but he did not lock in the pace or magnitude, stressing that decisions will depend on data. September projections showed 16 out of 18 Fed participants expected at least one more rate hike this year, while 4 projected two hikes. Markets assign an 85% probability of at least one rate hike before December, and a nearly 80% chance of at least two hikes by March 2027. Waller said that if data comes in as expected, further rate hikes are likely, but they do not need to be implemented at consecutive meetings, just completed within an acceptable timeframe.