Waller backs more Fed increases while leaving October alone

Federal Reserve Governor Christopher Waller said on Thursday that additional rate hikes will likely be needed to lower inflation to the Fed’s target². He said he expects the central bank will need to continue raising interest rates to bring inflation back to 2 percent, while skipping October¹. Speaking at an event in Turkey, he said hikes will be needed if economic data comes in as expected, but that there is some flexibility on when they should occur⁴.

Coverage read the same remarks as a signal about timing rather than direction. One account said the governor sees multiple rate increases ahead to cool inflation and remains concerned about the inflation picture³. Another described a top Fed official casting further doubt on a rate rise this month⁵.

The October question

Waller is not the first official to push the next move back. His comments followed New York Fed President John Williams, who signaled the Fed may take its time before deciding to raise rates again⁷. Williams said on September 29 that “with the policy action we took at our September meeting, there is no need for urgency”⁶.

Pricing has moved with those remarks. The odds of an October rate increase fell from 51 percent to 19 percent in one week, one account reported⁶. The direction the officials describe is still upward; what the sources put in question is the pace^2,3,4.

What it means for investors

A Fed that intends to keep raising rates but not at the next meeting is a different proposition for the front end of the curve than one that is finished. The sources have Waller endorsing more than one further increase while explicitly allowing that the timing can slip, and they tie the condition to incoming data coming in as expected^3,4.

The word used in two of the accounts is flexibility, and it is attached to the pace rather than to the destination^2,7. What the sources do not give is a number of increases, a terminal rate, or a date for the next move, and Waller himself is quoted setting a condition rather than a schedule^1,4. Williams, for his part, framed the September increase as reason to wait rather than to hurry⁶. The accounts agree on the substance and differ in emphasis: two lead on the need for more increases^2,3, two on the doubt now cast over a move this month^1,5.