Fed’s Waller: Inflation Report to Determine September Rate Hike
The upcoming decision on the U.S. Federal Reserve’s interest rate is now dependent on a single data point. Fed Governor Christopher Waller stated on Thursday that the August inflation report, set to release on September 11, will be the pivotal factor in his decision to support a rate hike at the Fed’s September 15–16 meeting.
“Should inflation surge, I would consider a rate hike,” Waller expressed. He further explained that the current borrowing costs are only “slightly restricting” consumer and business demand, implying that even a minor inflation increase could tip the balance. Conversely, if inflation continues to subside, Waller suggested he would be more inclined to maintain the benchmark rate.
Markets reacted favorably to Waller’s statements: stock prices increased and bond yields decreased. The interest rate swap markets are now predicting approximately even odds of a September rate hike, a significant drop from the 70% earlier in the week. The two-year Treasury yield saw a decrease of three basis points to 4.34%.
These comments highlight a growing divide within the Fed. Last week, Chair Kevin Warsh indicated that inflation hasn’t shown sufficient improvement, suggesting the central bank may have “more work to do.” Meanwhile, New York Fed President John Williams stated he wants more evidence before endorsing another hike. The focus now shifts to the September 11 CPI print, described by one portfolio manager as a “knife-edge” moment for monetary policy.
Source: AP via Local10 – Fed’s Waller says next rate move depends on upcoming inflation report