Dollar falls to lowest since May after Waller’s inflation comments signal Fed patience

The US dollar dropped to levels not seen since May after Federal Reserve Governor Christopher Waller pointed to meaningful progress on inflation, hinting that the central bank might hold rates steady at its mid-September meeting. The yen, meanwhile, surged against its major counterparts, a one-two punch that rattled currency markets on September 3. Waller’s comments landed with particular weight because they diverge from the more hawkish posture recently adopted by Fed Chair Kevin Warsh. The inflation numbers behind Waller’s shift Three-month core inflation, as measured by the Personal Consumption Expenditures index, declined from 4.76% in February to 3.05% in July. That’s still above the Fed’s 2% target, but the trajectory is clearly moving in the right direction. Year-over-year core PCE came in at 3.3% for July. Both headline and core PCE rose just 0.2% in July, suggesting that price momentum is losing steam. Waller framed his position as fundamentally data-dependent, saying policymakers should “give disinflation a chance.” His readiness to support a steady policy rate is contingent on August inflation data coming in favorably. If the numbers cooperate, the September FOMC meeting...