Federal Reserve Governor Christopher Waller stated on September 3, 2026, that he is inclined to support keeping interest rates steady at the central bank's September meeting, provided upcoming inflation data does not present any surprises [1]. Waller expressed confidence in current inflation trends, noting that tariff impacts have been muted and higher energy prices have not substantially affected other parts of the economy [1]. He acknowledged that inflation remains 'meaningfully above' the Fed's 2% target but highlighted recent signs of disinflation, saying, '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' [1].
Following Waller's comments, market-implied odds for a rate hike at the September 15-16 meeting dropped sharply, with traders now pricing in just a 48.4% probability, down about 15 percentage points from Wednesday, according to the CME Group's FedWatch gauge [1]. Waller paraphrased John Lennon, stating, 'Give disinflation a chance. We can wait one meeting,' and argued that hiking 25 basis points at this time would not bring the CPI down to 2% [1].
Waller did add caveats, noting that if there are indications of reversed progress toward 2% inflation in August, he could support tighter policy, stating, 'If there is evidence that progress toward 2% inflation reversed in August, a small adjustment in our stance would help ensure that it resumes' [1]. The Fed will receive major inflation reports, including the consumer and producer price indexes, next week, which feed into the Commerce Department's personal consumption expenditures price index—the Fed's main inflation barometer [1].
Waller's remarks contrast with statements from Chairman Kevin Warsh made less than a week earlier at the Fed's annual symposium in Jackson Hole, Wyoming. Warsh said that recent softer monthly inflation readings 'do not tell me that underlying trends have meaningfully improved' and suggested that if trends do not cooperate, 'we have work to do' [1]. Markets interpreted Warsh's comments as hawkish, quickly pricing in a strong possibility for a rate hike at the upcoming meeting [1]. However, Waller offered a more dovish perspective, noting that while headline inflation was at 3.7% and core at 3.3% for July, underlying trends are 'better than the core numbers suggest' [1].
CONCLUSION
Fed Governor Waller's dovish stance has led to a notable decrease in market expectations for a September rate hike, with traders now assigning less than a 50% probability. However, the final decision remains contingent on upcoming inflation data, and Waller has indicated flexibility should inflation trends reverse. The market takeaway is a shift toward caution and patience, awaiting further economic indicators.