Fed Governor Christopher Waller signaled he’s now leaning toward holding rates steady at the September meeting, pulling the market-implied odds of a hike back to a coin flip just days after Chair Warsh’s hawkish Jackson Hole tone had pushed them well above 50/50.
Key Takeaways
- The event: Fed Governor Christopher Waller, a key swing voter, said he’s “inclined” to support holding rates steady at the September 15-16 FOMC meeting, provided upcoming August inflation data confirms recent disinflation progress.
- The immediate reaction: CME FedWatch odds of a September hike fell to roughly 50.4%, down sharply from about 63.2% the day before.
- The policy outlook: Waller’s entire position hinges on the August CPI report due in the next two weeks — a mild print keeps a hold in play, a hot print could quickly flip him back toward supporting a hike.
The Macro Backdrop
Waller framed his shift in fairly explicit terms: the Fed’s preferred three-month inflation gauge has fallen from 4.76% in February to roughly 3.05% now, which he called “a considerable improvement” with an “encouraging” pace of decline. Still above the 2% target, but trending the right direction — enough, in his view, to justify patience rather than an immediate hike.
What makes his comments significant is less the substance than the source. Waller has been one of the more consistently hawkish voices on the committee this year, and his own account of his shift is notable: as one closely-watched Fed reporter put it, his posture “hasn’t fundamentally changed since July, but the tilt has” — from worried and leaning toward tightening, to tentatively encouraged and leaning toward holding. A swing voter moving toward the dovish side of the argument carries real weight for the committee’s eventual vote.
What The Market Is Watching
The shift was covered widely and immediately across financial media as a market-moving event in its own right:
Notably, Waller’s comments also landed amid visible daylight between the White House and the Fed — Vice President JD Vance has separately called for rate cuts to ease housing costs, adding a layer of political pressure to a decision policymakers insist will be driven purely by the data.
Currency Pair & Market Impact
The dollar and Treasury yields both softened following Waller’s remarks, a fairly direct read on reduced rate-hike conviction. That reaction sits in tension with the “hawkish surprise” framing from Chair Warsh’s Jackson Hole speech just over a week earlier, and underscores how quickly rate-path expectations can swing between now and the actual September decision as individual officials stake out their positions.
Forward-Looking Outlook
The August CPI report, due within the next two weeks, is now unambiguously the single most important data point standing between here and the September 15-16 decision. Waller has been explicit that a hot print would be enough to nudge him back toward supporting a hike, meaning this one release may do more to settle the September question than anything said at Jackson Hole or in this speech combined.
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