Fed’s Chris Waller Says September FOMC Decision to Depend on August Inflation Data
Highlights
- Chris Waller said that he would support a hold if inflation cools.
- The Fed Governor would consider a rate hike if inflation comes in hot.
- The odds of a September rate hike has again fallen.
Federal Reserve Governor Chris Waller has revealed the conditions that will influence his decision at the September FOMC meeting. This comes as a Fed rate hike remains a strong possibility, especially with energy prices rising again amid fresh attacks in the U.S.-Iran war.
Waller Comments On Monetary Policy Ahead of September FOMC Meeting
In his remarks at a Reuters interview, the Fed Governor said that he is willing to support holding rates steady at their current level if there is continued progress towards their 2% goal. However, he could consider backing a rate hike if the August inflation reading comes in hot.
The August CPI and PPI inflation data will be released just a week before the September FOMC meeting on the 16th. Commenting on his current view of monetary policy, Waller said policy is only slightly restricting aggregate demand, so inflation may not need much acceleration for him to support a hike.
“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,” the Fed Governor said. It is worth noting that the August employment report drops tomorrow, which could also influence the September Fed rate decision.
However, Waller doesn’t expect the employment data to deviate much from what they have been seeing. As such, his decision at the September FOMC meeting will largely depend on the August inflation figures.
Other Fed officials have also shared their stance on monetary policy ahead of the meeting. Fed Governor Michael Barr said the Fed should raise rates decisively if it does not see evidence that inflation is moderating sufficiently.
Odds Of A Hike Fall
The odds of a September rate hike have fallen despite recent tensions in the U.S.-Iran war. Data from the top crypto prediction platform Polymarket shows only a 38% chance that the Fed will hike rates later this month, down from almost 50% earlier this week.
Meanwhile, there is a 63% chance that the Fed will keep rates unchanged. The drop also comes amid reports that Trump is considering whether to declare the Iran war over, a move which could ease inflationary pressure as energy prices fall.
The CPI and PPI are likely to be the deciding factors, as a hot inflation reading could lead other Fed officials besides Waller to back a rate hike. Crypto traders are also still betting on a hike this year, with a 64% chance of it happening, according to Polymarket data.
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