Fed September Rate Hold Looks Likely, Waller Says

On Sept. 3 Federal Reserve Governor Christopher J. Waller said he would be inclined to support a Fed September rate hold if August inflation confirms continued disinflation, keeping a September hike possible and putting the August personal consumption expenditures (PCE) release at the center of the run-up to the Sept. 15–16 Federal Open Market Committee (FOMC) meeting.

Waller’s Conditional Hold and Inflation Outlook

Waller delivered prepared remarks published by the Federal Reserve Board as “Speech by Governor Waller on the economic outlook,” reflecting his individual view rather than formal policy. He said he would support holding the federal funds rate at its current level if recent disinflation trends continue in the data due over the next two weeks but left open the possibility of a September increase if August inflation “comes in hot” or shows that progress has reversed.

He cited July PCE data showing headline and core prices each rose 0.2% month-over-month. Over the 12 months through July, headline inflation was 3.7% and core inflation 3.3%. Waller emphasized shorter-term momentum, noting the three-month annualized core PCE through July fell to 3.05% from 4.76% in February. He described this as a “considerable improvement” and argued that 12-month figures are “not the best guide” to current inflation, with short-horizon measures indicating easing underlying pressure.

Waller characterized current policy as “only slightly restricting aggregate demand” and warned that a modest acceleration in inflation would prompt him to support tighter policy. He described the labor market as stable, with employment near its maximum sustainable level, and said his vote would be heavily influenced by August inflation data rather than near-term employment surprises.

He also flagged geopolitical tensions, trade policy, and advances in artificial intelligence as sources of upside and downside risk to inflation and growth.

Warsh’s Jackson Hole Warning and Policy Contrast

Federal Reserve Chair Kevin Warsh delivered a speech at the Jackson Hole symposium on Aug. 28, stressing that the Fed’s 2% PCE inflation target is “firm and fixed.” He said recent data did not show “meaningful improvement” in underlying inflation and warned the Fed “still has work to do” if inflation does not decline clearly and rapidly toward 2%. Warsh pointed to elevated medium-term PCE readings, including a six-month figure near 4.1%, as evidence supporting readiness for further tightening if inflation remains elevated.

This stance contrasts with Waller’s conditional pause, highlighting internal Fed messaging tension ahead of the September meeting.

Implications for the September Meeting

Waller’s remarks make August inflation data the pivotal input for the September FOMC meeting. If short-term measures continue to cool, he is inclined to support a pause. If August readings reverse course, a modest rate increase remains possible. The Fed’s communications leave a narrow data window that will determine whether the committee maintains its current stance or tightens further.

“If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said.