Zürcher Nachrichten - US Fed official joins growing group open to rate hike if inflation rises

Waller's comments add his voice to a growing group of voting members on the Fed's 12-strong rate-setting committee who have made similar comments.

At the committee's last meeting in July, three regional Fed presidents dissented from the decision to hold rates steady, calling for an immediate 0.25 percentage-point hike to tackle inflation.

"My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation," Waller told Reuters on Thursday.

"If there is continued progress toward our two percent goal, then I am willing to support holding the policy rate at its current level. But if inflation comes in hot, I would consider a rate hike."

With Waller, that makes at least five officials on the committee who have said they are ready to raise interest rates if inflation data does not show attenuation.

Fed chair Kevin Warsh has not explicitly said he is ready to raise rates, but said in a rare speech on his view of the economy last week that if inflation did not come down the central bank would have "work to do."

Warsh also indicated that he did not see current financial conditions as "restrictive," with rampant investment and loan activity ongoing -- a hint that a rate hike may be on the horizon to tackle high prices.

The Federal Reserve has a long-term two-percent target for inflation, but has missed this goal for more than five years.

The Fed's preferred inflation gauge hit a peak of 7.2 percent in 2022, and while it has since dropped, US President Donald Trump's Iran war and tariff policies have sent it higher again this year.

The Personal Consumption Expenditures (PCE) price index came in at 3.7 percent in July, down slightly from a three-year high in May.

August data on US employment -- the Fed's other mandate -- and the consumer price index is due before the rate-setting committee's next two-day meeting on September 15-16.

The Fed has held rates steady at 3.50 to 3.75 percent since December 2025, when it paused its rate-cutting cycle to gauge the effects of Trump's tariffs on prices.

Markets gauge the odds of the Fed raising rates versus holding them steady as almost even, based on futures investments, according to CME's FedWatch tool.

On Wednesday, New York Fed President John Williams policymakers needed to "wait and see."

"There's no clear signs right now that whether monetary policy currently is sufficient to make sure we bring inflation back to target in next year or two, or whether we would need to see further action to do that," he said.

F.Schneider--NZN