Fed's Waller: August inflation data key to September rate decision

US Fed's Waller says August inflation data will determine stance on September rate hike

Washington, September 4

As per an official statement, Waller said recent data had shown some signs of easing inflation, but the upcoming data would be important in deciding the next policy move.

"My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation," Waller said.

The Federal Open Market Committee (FOMC) is scheduled to meet on September 15 and 16. Waller said that if inflation continues to move towards the Fed's 2 per cent goal, he would support keeping the policy rate at its current level.

"If there is continued progress toward our 2 per cent goal, then I am willing to support holding the policy rate at its current level. But if inflation comes in hot, I would consider a rate hike," he said.

Waller said inflation remains meaningfully above the Fed's 2 per cent target, but recent data suggest that price pressures are gradually easing.

The three-month core inflation rate stood at 3.05 per cent through July, down steadily from 4.76 per cent in February. Core inflation excludes food and energy prices and is used by Waller as a guide to the underlying inflation trend.

He said the downward movement was a "considerable improvement" and that the speed of the decline was encouraging.

However, Waller also pointed to risks that could push inflation higher. Energy prices have risen again and remain significantly higher than at the beginning of 2026, while the economy faces pressure on technology goods prices linked to the expansion of artificial intelligence and the possibility of further tariff increases.

At the same time, Waller said the broader US economy remains in relatively good shape. Real GDP grew at an annual rate of 1.8 per cent in the first half of 2026, while real private domestic final purchases rose 3 per cent during the period.

The labor market has also remained stable, with job creation averaging 60,000 a month through July and the unemployment rate at 4.1 per cent in July.

Waller said the strength of economic activity and relative stability in the labor market mean that inflation is currently his main focus in deciding the appropriate monetary policy stance.

He also said the current policy rate is only slightly restricting aggregate demand and warned that a renewed acceleration in inflation could push him towards tighter policy.

"If there is evidence that progress toward 2 percent inflation reversed in August, a small adjustment in our stance would help ensure that it resumes," Waller said.

— ANI