Waller signals caution on a possible September rate increase

Federal Reserve Governor Christopher Waller said recent data show signs of disinflation and indicated he could support keeping the federal funds rate at its current level if that trend continues. He said revised estimates for some service prices could also lower measured inflation by a few tenths of a percentage point.

Waller cautioned that August inflation data due next week could change his view ahead of the Fed’s Sept. 15-16 policy meeting. Following his comments, market-implied odds of a September rate hike fell from about 63% to roughly 50%.

Other Fed officials offered mixed views, with Michael Barr saying moderating inflation could justify waiting, while a recent hawkish speech by Fed Chair Kevin Warsh kept pressure on policymakers to address inflation.

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