6 hrs ago
Waller Keeps September Fed Hold Alive as CPI Looms
The Federal Reserve is deciding whether to raise interest rates in September.
Governor Christopher Waller said he could support leaving rates where they are if inflation keeps slowing.
However, he said a surprisingly high August inflation report could make him support a rate increase.
That inflation report is expected on September 11.
Jobs data will arrive earlier, on September 4, and could also affect his opinion.
Inflation measured by core PCE is still above the Federal Reserve’s 2% goal.
Waller said a planned change in how some financial-service prices are measured could lower that inflation reading.
Economists and financial markets disagree about whether rates will rise or stay the same.
Federal Reserve Governor Christopher Waller said he could support holding rates at 3.50%-3.75% on September 15-16 if disinflation continues.
Waller said a hotter-than-expected August CPI report could lead him to support a rate hike.
The August CPI report is due September 11, while August payrolls data is scheduled for September 4.
Core PCE inflation remained at 3.3% year over year in the latest reading, above the Fed’s 2% target.
Economists remain divided, with HSBC seeing nearly even odds of a hike and Goldman Sachs expecting rates to remain unchanged.
- Who
- Federal Reserve Governor Christopher Waller, Federal Reserve officials, financial markets, and economists including HSBC and Goldman Sachs chief economist Jan Hatzius.
- What
- Waller said September’s rate decision could be either a hold at 3.50%-3.75% or a hike, depending mainly on incoming inflation data.
- Where
- Washington, where Waller participated in a Reuters NEXT Newsmaker Interview.
- When
- Waller spoke Thursday, September 3; payrolls are due September 4, CPI September 11, and the policy meeting is September 15-16.
- Why
- The Federal Reserve is assessing whether inflation is continuing to moderate toward its 2% target while monitoring the labor market and underlying price pressures.
Rate Hold
Rate Hike
September policy decision
Rate Hold
Waller said he would support keeping rates at 3.50%-3.75% if incoming data continues to show disinflation. Goldman Sachs chief economist Jan Hatzius also expects rates to remain unchanged.
Rate Hike
Waller said he would consider a hike if August inflation is hotter than expected. HSBC estimates the probability of a 25-basis-point hike at close to 50%.
Inflation outlook
Rate Hold
Waller said the pace of disinflation since February has been encouraging, and he expects a methodology change for financial-services fees could reduce measured 12-month PCE inflation by a few tenths of a percentage point.
Rate Hike
Core PCE inflation remains at 3.3%, above the Federal Reserve’s 2% target. Fed Chair Kevin Warsh said rates could need to rise if underlying inflation does not improve further.
Market expectations
Rate Hold
After Waller’s remarks, traders reduced expectations for a September increase, with futures and swaps pricing the probability at about 50%.
Rate Hike
After Warsh’s August 28 Jackson Hole remarks, market expectations for a September hike had risen to about 60%-66%, from around 35%.
Key facts
- Current federal funds rate
- 3.50%-3.75%
- Policy meeting
- September 15-16
- August CPI release
- September 11
- August payrolls release
- September 4
- Core PCE inflation
- 3.3% over 12 months, above the Fed’s 2% target
- Waller’s main decision factor
- The August CPI report
- Market-implied hike odds after Waller’s comments
- About 50%
Quotes
Christopher Waller
Federal Reserve governor discussing his potential vote at the September policy meeting
“If inflation comes in hot, I would consider a rate hike.”
CNBC TV 18
“heavily influenced”
CNBC TV 18
Sources
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