Fed's Waller Explains Pivot to Rate Hike as Inflation Expectations Climb, Says Further Tightening Possible if...

Fed Governor Christopher Waller says persistent price pressures and shifting economic risks forced his pivot on monetary policy, according to TheStreet. In remarks prepared for the Istanbul Economic Forum on Oct. 8, he pointed to the FOMC's September decision to raise the benchmark rate by a quarter point to a range of 3.75% to 4%. The Sept. 16 vote was unanimous at 12-0, ended a nine-month pause, and reversed a sequence of late-2025 rate cuts.
Waller cited stubborn energy costs tied to the Iran war, rising tech prices driven by the AI buildout, and looming trade tariffs as factors stalling progress toward the Fed's 2% inflation target. The elevated August CPI reading finalized the shift, he said.
"I am concerned that the recent acceleration in inflation... will lead consumers, investors, and price-setting businesses to revise up their expectations for future inflation," Waller said. He added that he is "not greatly concerned" that tighter policy threatens a damaging slowdown, and that policymakers are prepared to tighten further if price pressures fail to abate.
- The New York Fed's September Survey of Consumer Expectations showed the median one-year-ahead inflation expectation jumping 0.3% to 3.9%, the highest level in three years
- The next CPI report is slated for Oct. 14, with consensus expecting headline inflation to accelerate, largely because of higher energy prices
- The September meeting minutes did not reflect a clear plan to hike at the Oct. 27-28 meeting, and some policymakers have suggested another hike could wait until Dec. 8-9
- According to CME FedWatch on Oct. 10, traders see an 81.6% probability of a hold in October and an 83% chance of a hike in December