US Fed's Christopher Waller urges 'give disinflation a chance' as rate hike remains on table

Federal Reserve Governor Christopher Waller is making a case for patience on interest rates, arguing that the US central bank should give cooling inflation more time to show through before reaching for another rate hike.

Waller said on Thursday that he would be inclined to support keeping the Fed's policy rate at its current level at the September 15-16 meeting if incoming data, particularly August inflation, confirms that price pressures are continuing to ease.

"My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation," Waller told a Reuters NEXT Newsmaker event in Washington.


"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.

His message, however, was not a call to declare victory on inflation. Waller made clear that the case for higher rates could quickly return if price pressures prove more persistent than expected.

"If inflation comes in hot, I would consider a rate hike" at the September meeting, Waller said.

The Fed's current policy rate of 3.50%-3.75% is "only slightly restricting aggregate demand," according to Waller, leaving relatively little room for an inflationary acceleration before he would favour tighter policy.

That leaves the central bank facing a familiar but increasingly delicate trade-off. Inflation remains "meaningfully above" the Fed's 2% target, but Waller said it "is making slow but continued progress on reaching" that goal. With the broader economy performing solidly and the labour market relatively stable, he said inflation is now his main policy concern.

For Waller, the argument for waiting is less about assuming inflation will fall automatically and more about allowing recent improvements to establish a clearer trend.

"I'm going to paraphrase John Lennon here. Give disinflation a chance," Waller said. "I'm not going to say let's wait until next year, but let's just wait and see if we get some improvement on this."

His comments come as investors have been weighing the possibility of a rate hike at this month's meeting. A range of Fed officials has recently highlighted persistent inflation risks, with some arguing for tighter policy while others remain open to waiting for clearer evidence.

After Waller's remarks, traders reduced their expectations for a September rate hike to roughly even odds from about 60% earlier. Stock futures were little changed, while Treasury yields fell as expectations for the Fed's policy path shifted.

Waller also pushed back against some of the recent sources of inflation pressure. He said higher energy prices and tariffs were unlikely to remain major drivers of inflation.

"I don't see elevated energy prices and tariffs now as a significant source of ongoing inflation pressure," Waller said.

Still, the risks have not disappeared. Energy prices have risen again and remain well above their levels at the start of 2026. Waller also pointed to pressure on technology goods prices from the AI buildout and the possibility of further tariff increases.

That leaves the Fed with little room for complacency. For now, Waller's message is to wait for more evidence, but not to take another hike off the table.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)