Federal Reserve Governor Christopher Waller has stated that both household and business spending in the United States remain robust, despite increasing costs of goods due to tariffs and recent energy-price spikes linked to Middle East tensions. Waller’s comments suggest that he does not see the labor market as a primary driver of inflation, and he anticipates that inflation will slow in the future. These remarks reflect a shift in his policy stance, focusing more on inflationary pressures rather than concerns over employment levels.
The market appears to interpret Waller’s latest statements as supporting a potential rate hike in 2026. This perspective is consistent with ongoing strong consumer spending and significant business investment growth, which both contribute to the current economic landscape. As of now, market pricing for a rate hike in 2026 has risen to 64% YES, up from 58% just 24 hours prior, indicating increased confidence among market participants in this outcome.
Waller’s shift from advocating for rate cuts earlier in the year to expressing caution on rate reductions amid persistent inflation risks highlights a significant pivot in his economic outlook. This development aligns with the current inflation data, showing headline CPI at 3.3% and core PCE at 3.4%, levels substantially above the Federal Reserve’s 2% target.
