Waller Urges Fed to 'Give Disinflation a Chance'

Fed Gov. Christopher Waller will back holding rates steady in September if inflation keeps cooling, reversing market expectations of a hike.

Federal Reserve Governor Christopher Waller said Thursday he is leaning toward keeping interest rates steady at the central bank's September 15-16 policy meeting if the next round of inflation data shows price pressures continuing to moderate. Speaking at a Reuters NEXT Newsmaker event in Washington, he paraphrased John Lennon — "give disinflation a chance" — and argued against prematurely raising rates while the cooling process plays out. The Lufkin Daily News reports he also cautioned: "If inflation comes in hot, I would consider a rate hike."

The stance is a genuine reversal. According to The Lufkin Daily News, investors had been pricing in solid odds of a quarter-percentage-point hike this month before Waller spoke, three Fed policymakers dissented at the July 28-29 meeting because they favored a hike, and Chairman Kevin Warsh warned at the Jackson Hole symposium last week that action was likely if inflation pressures did not moderate. TradingView carried the same report of Waller's plea to give disinflation a chance, marking a clear split inside the central bank.

The Lufkin Daily News reports that after Waller's remarks, stock prices rose, Treasury yields fell, and traders slashed rate-hike bets, with short-term futures indicating the Fed is now more likely to leave rates unchanged this month than to raise them — though a hike by year-end is still seen as almost certain. Analysts at Evercore ISI said Waller is "leaning towards a hold," echoing New York Fed President John Williams, who told CNBC the latest inflation data was encouraging but that confidence requires more than a month or two of improvement.

The Labor Department releases the August CPI report next week — the last major price data before the meeting — and The Lufkin Daily News reports Waller said it will give "a pretty accurate idea" of where the PCE index, up 3.7% in July year over year, will land. He said easing in three-month annualized CPI would make him comfortable holding, with rates at 3.50%-3.75% "only slightly restricting aggregate demand." He flagged upside risks: energy prices well above their start-of-2026 level, AI-buildout pressure on technology goods prices, and possible further tariff increases. Friday's August jobs report comes first.