Waller conditions a September rate hold on next week's inflation data as bond yields fall
Federal Reserve Governor Christopher Waller said he could support holding the federal funds rate at its current level in September if August inflation data continues to show improvement, though a hot reading could still push him toward a hike. Bond yields fell and traders cut the odds of a rate increase by about twelve percentage points to roughly 55 per cent after his remarks, market commentary said, with record diesel prices and services inflation flagged as risks to that outcome.
Economics & Markets··Night
Waller sets a data-dependent bar for the September decision
Federal Reserve Governor Christopher Waller said in a speech that his view on the appropriate stance of policy would be heavily influenced by what the August inflation data show, due September 11 ahead of the Fed's September 15-16 meeting. He said he would be inclined to support holding the federal funds rate at its current setting if the recent improvement in inflation continues, putting three-month core inflation at 4.76 per cent in February and noting it has fallen steadily since. In the same remarks he put real gross domestic product growth at 1.8 per cent in the first half of 2026, average monthly job creation at 60,000 through July, and the unemployment rate at 4.1 per cent in July; personal consumption expenditures inflation stood at 3.7 per cent over twelve months and the core measure at 3.3 per cent. He added that if the August data show the improvement has been fleeting, raising the policy rate may be appropriate.[1]
Bond yields and hike odds fall on the conditional signal
Financial commentary on the remarks said bond yields moved lower and the odds of a rate increase at the September meeting dropped about twelve percentage points to roughly 55 per cent as traders priced in Waller's openness to a hold. The same commentary stressed that his position was conditional rather than a promise: a surprise to the upside in inflation could still lead him to back a hike. It flagged record diesel prices and persistent services-sector inflation as risks that could complicate a hold, and said rate-sensitive assets such as homebuilders, utilities, long-duration Treasuries and technology stocks were now trading on expectations for the coming inflation print.[2]
August inflation data due before the Fed's mid-September meeting will decide the outcome
The August consumer price data are scheduled for release on September 11, five days before the Federal Open Market Committee announces its rate decision on September 16. Waller's remarks left both outcomes on the table: continued disinflation would support a hold at the current federal funds rate, while a hotter-than-expected reading could tip him toward backing an increase. Market commentary noted that the roughly twelve-point swing in hike odds already shows how sensitive trading positions in bonds and rate-sensitive equities have become to that single upcoming data point.[1], [2]
