Waller Favors Holding Rates Steady If August Inflation Cools

Federal Reserve Governor Christopher Waller stated he is inclined to support keeping interest rates steady at the September meeting, provided that August Consumer Price Index (CPI) data shows price pressures continuing to cool.

Waller made these remarks during the Reuters NEXT Newsmaker event in Washington on Thursday. He emphasized that the interest rate decision remains highly data-dependent, particularly regarding the latest inflation trends leading up to the Fed's policy meeting.

While leaving the door open to holding rates steady, Waller did not entirely rule out a rate hike. He signaled that a resurgence in inflation could prompt the Fed to raise rates again at the September meeting.

Waller's tone was considered relatively hawkish, yet more flexible than some of the Fed's previous communications. He acknowledged signs of disinflation and resilient consumer spending but stressed that the central bank has little tolerance for the risk of renewed inflation.

The FXS Fed Sentiment Index fell 2.06 points to 125.38, indicating a slight decline in hawkishness based on recent Fed communications. However, the index remains well above the neutral threshold of 100, signaling that the Fed's overall stance stays in hawkish territory.

News Analysis: Waller's comments signal that the Fed is beginning to consider holding rates steady, but only if August inflation data shows genuine progress. For the market, this makes the August CPI a crucial catalyst ahead of the September meeting. If inflation cools, the US dollar and Treasury yields could weaken, potentially boosting gold and risk assets. Conversely, if inflation heats up again, the likelihood of a rate hike could rise, impacting the markets accordingly. (ASD)

Source: Newsmaker.id