Federal Reserve Governor Christopher Waller just gave markets something they hadn’t heard in a while: a reason to exhale. Speaking during a Reuters NEXT Newsmaker interview on September 3, Waller said he’d support keeping the federal funds rate unchanged at the upcoming FOMC meeting, provided incoming inflation data continues to show disinflation. US stock futures climbed modestly on the remarks, and bond yields, which had been on a hawkish tear, finally stabilized.
The timing matters. Fed Chair Kevin Warsh had recently pushed markets in the opposite direction with comments that lifted near-term rate hike expectations. Waller’s more measured tone offered a counterweight, and traders moved fast to reprice accordingly.
The inflation picture Waller is watching
Waller didn’t pretend inflation is solved. He acknowledged that it remains “meaningfully above” the Fed’s 2% target. Headline inflation sat at 3.7% as of July, with core inflation at 3.3%. Those are not victory-lap numbers.
But he pointed to a trend that he called “encouraging.” The three-month annualized inflation rate dropped from 4.76% in February to 3.05%. That’s a meaningful deceleration in a relatively short window, and it’s the kind of momentum the Fed watches closely when deciding whether to tighten further or sit tight.
