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Fed Governor Waller signals he would back holding rates steady in September if disinflation continues
CNBC reports Fed Governor Christopher Waller said he is leaning toward keeping the federal funds target unchanged at the September meeting, citing signs of disinflation and saying tariff and energy effects appear less broad than expected. CME FedWatch probabilities for a hike reportedly fell to about 48.4%.
Fed Governor Christopher Waller indicated he is inclined to support holding interest rates steady at the September meeting, provided upcoming inflation data do not surprise. CNBC reports that Waller framed the current inflation backdrop as still “meaningfully above” the Fed’s 2% goal, but said recent trends point to disinflation. He also argued that tariff impacts have likely been muted and that higher energy prices have not materially spread to other parts of the economy.
In remarks for a Reuters interview, Waller said that if the same pattern continues in the data coming over the next two weeks, he would be inclined to keep the federal funds rate at its current setting. He underscored that he would revisit that stance if the evidence between now and the meeting suggests progress toward 2% inflation has reversed, describing the policy stance as only slightly restricting aggregate demand at present.
The article links the communication to a change in market expectations. CNBC cites CME Group’s FedWatch gauge, saying the probability of a rate hike at the Sept. 15–16 meeting fell sharply after his comments to about 48.4%, down around 15 percentage points from the prior day’s level. The inflation releases that matter most are the CPI and PPI reports, which feed into the Commerce Department’s PCE price index, the Fed’s main inflation barometer.
Waller’s comments also referenced how headline and core readings may not fully capture the underlying trend. CNBC notes he cited signs of improvement in the three-month inflation rate in the Fed’s preferred gauge and suggested certain “nonmarket services prices” could be pushing inflation measures higher through estimation effects.
For FX traders, the key near-term watch is how CPI and PPI next week confirm or challenge Waller’s disinflation narrative, since that will feed into the odds of a September hold versus further tightening.
Why this matters for FX
An explicit Fed communication about the likely direction of policy—particularly around whether disinflation is progressing—directly affects expectations for the next rate decision. That can move US interest-rate pricing and the US yield curve, influencing the USD via relative rate differentials and risk of tighter financial conditions.