Key points

  • Waller said additional rate increases will likely be needed if economic data develop as expected, but the moves need not come at consecutive meetings.
  • He described the labor market as stable while citing 3% annual core PCE inflation in August and stronger second-half economic activity.
  • The September Fed projections showed 16 of 18 participants expected at least one more increase in 2026, though the policy path remains data-dependent.

Federal Reserve Governor Christopher Waller said additional interest-rate increases will likely be needed to return inflation to the central bank's 2% target, while emphasizing that policymakers retain flexibility over when to act. In an October 8 speech at the Istanbul Economic Forum, Waller said hikes do not have to occur at consecutive meetings and should remain responsive to incoming data.

A tighter path without a fixed calendar

Waller's message separates the likely direction of policy from a predetermined meeting-by-meeting schedule. He argued that officials can signal the approximate amount of tightening they expect over a period while retaining the option to move faster, slower or by a different increment if the economy changes. In his example, signaling a cumulative 75-basis-point increase over six months would give markets useful guidance without promising exactly which meetings deliver it. Reuters independently reported that the remarks leave room for the Federal Open Market Committee to pause at its October 27-28 meeting even as another increase remains possible later in the year.

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September marked a policy turn

The Fed raised its target range by 25 basis points in September to 3.75%-4%, ending nine months of unchanged rates. Waller rejected the idea that his support for the move rested on one hot inflation report. He said the judgment developed over months as the labor market stabilized and several inflation pressures became more persistent, including elevated energy costs, potential tariff effects and demand associated with the artificial-intelligence infrastructure buildout.

Inflation remains above target

Waller said August core personal consumption expenditures inflation was 0.25% for the month and 3% from a year earlier. He noted that the 12-month core measure has remained roughly between 2.5% and 3% since spring 2024. September payroll growth slowed, but he described the labor market as solid and stable, with unemployment still relatively low. He also said stronger activity in the second half reduced his concern that tighter policy would cause a damaging slowdown. That combination led him to focus near-term policy on the inflation side of the Fed's dual mandate and the risk that persistent price pressure could lift longer-term expectations.

Fed projections point higher

The September Summary of Economic Projections showed that 16 of 18 participants anticipated at least one more rate increase during the two remaining 2026 meetings, with four expecting two. Waller said futures prices as of October 7 assigned an 85% probability to at least one increase by the end of the December meeting and nearly a 20% probability to two. Those market-implied figures can change quickly and do not bind the committee.

What remains uncertain

Waller did not specify the total amount of additional tightening he personally supports or commit to a decision for October. He also stressed that his views are his own, not necessarily those of the Board or the FOMC. The policy outlook therefore remains conditional: stronger activity and sticky inflation would support higher rates, while weaker data could justify a slower pace. Each increase would affect loans, deposits, bonds and currency markets differently, and the cumulative effect arrives with a delay. For households and businesses, the speech signals that borrowing costs may rise further, but not according to an automatic calendar.

Sources

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