Fed's Waller Calls for Patience: 'Give Disinflation a Chance'

Federal Reserve Governor Christopher Waller is urging policymakers to pause before pushing rates higher again. In remarks delivered Sept. 3, Waller said he is inclined to keep the federal funds rate in its current 3.5% to 3.75% range at the upcoming FOMC meeting, arguing recent inflation readings warrant more time before the Fed responds. His message was straightforward: "Give disinflation a chance. We can wait one meeting." Waller pointed to a key improvement in the data. The three-month core inflation rate eased to 3.05% through July from 4.76% in February. The level remains above the Fed's 2% goal, but Waller described the direction of travel as "encouraging." He also questioned the value of another small move, saying a single 25-basis-point increase would do little to materially pull CPI toward target. By his assessment, policy is only slightly restrictive, suggesting the current rate setting is already applying some pressure to inflation. Waller framed his preference to wait against a complex risk backdrop. Tariffs enacted in 2025 are still working through supply chains and consumer prices. Higher energy costs tied to ongoing military conflicts in the Middle East are keeping input costs elevated across key industries. He also highlighted uncertainty around AI-driven demand, which is creating pricing dynamics economists are still working to understand. Even so, Waller left the door open to further tightening. He said a reassessment would be appropriate if upcoming inflation data disappoints, and he has previously warned that persistently high core inflation could require a more restrictive stance. The comments also mark a shift in Waller's own positioning. He entered 2026 with a relatively dovish view, expecting inflation to cool faster than it did. As that failed to materialize, he moved to a more data-dependent approach. That places him at some distance from Chairman Kevin Warsh, who has reportedly favored a more aggressive rate posture. For markets, Waller's stance offers a near-term easing of rate-hike fears. Holding the policy rate at 3.5% to 3.75% gives risk assets, including equities, breathing room. If the next inflation prints confirm continued cooling, the case for an extended hold strengthens. If readings rebound toward February's 4.76% pace, the debate could quickly turn back to tightening.