Federal Reserve Governor Christopher Waller has indicated a shift in risk assessment, citing a stabilized labor market and rising inflation as factors that could influence monetary policy decisions. Waller’s remarks come as inflation continues to rise, with the U.S. Consumer Price Index (CPI) showing a 4.25% increase over the past year. This shift in focus may impact the Federal Open Market Committee’s (FOMC) upcoming decision on interest rates. Despite Waller’s suggestion of a potential rate cut, market expectations currently lean towards no change in rates at the July meeting.
The market for the July 2026 FOMC meeting currently prices an 86.5% likelihood of no change in interest rates, a slight decrease from 90% a day earlier. This pricing suggests that market participants are considering the possibility of a rate adjustment in light of Waller’s comments. However, the likelihood of a rate hike by the September meeting remains at 28%, reflecting some uncertainty about future policy moves.
Waller’s stance also highlights a departure from his previous easing bias as he now emphasizes employment risks over inflation concerns. This change in perspective, alongside his call for a 25-basis-point rate cut, suggests a nuanced approach to balancing economic growth with inflation control.
