Federal Reserve Governor Christopher Waller has indicated that the Federal Reserve may consider raising interest rates soon if the upcoming core inflation data remains elevated. This warning comes as the U.S. economy continues to show resilience amidst persistent inflation pressures attributed to tariffs, energy costs, and demand for AI infrastructure. The Federal Open Market Committee (FOMC) will meet on July 29, 2026, to review monetary policy, and Tuesday’s inflation data is expected to play a crucial role in their decision-making process.
Currently, markets are pricing in a 38.6% probability of a rate hike at the July meeting, up from 20% a day ago. For the September meeting, the odds have risen more significantly, with a 56% chance of a rate increase, reflecting growing concerns over inflation that has consistently surpassed the Fed’s target. The probability of a rate hike by October stands at 68%, suggesting that markets are preparing for potential monetary tightening this year.
Governor Waller’s comments have shifted market sentiment, leading to a reassessment of the likelihood of rate hikes in 2026. The probability of a rate hike within the year has increased to 77.5%, indicating that market behavior aligns with expectations of continued inflationary pressures influencing Fed policy.
