Fed’s Waller signals shift in risk focus amid rising inflation, stable labor market

Federal Reserve Governor Christopher Waller has indicated a shift in risk assessment, citing a stabilized labor market and rising inflation as factors that could influence monetary policy decisions. Waller’s remarks come as inflation continues to rise, with the U.S. Consumer Price Index (CPI) showing a 4.25% increase over the past year. This shift in focus may impact the Federal Open Market Committee’s (FOMC) upcoming decision on interest rates. Despite Waller’s suggestion of a potential rate cut, market expectations currently lean towards no change in rates at the July meeting.

The market for the July 2026 FOMC meeting currently prices an 86.5% likelihood of no change in interest rates, a slight decrease from 90% a day earlier. This pricing suggests that market participants are considering the possibility of a rate adjustment in light of Waller’s comments. However, the likelihood of a rate hike by the September meeting remains at 28%, reflecting some uncertainty about future policy moves.

Waller’s stance also highlights a departure from his previous easing bias as he now emphasizes employment risks over inflation concerns. This change in perspective, alongside his call for a 25-basis-point rate cut, suggests a nuanced approach to balancing economic growth with inflation control.

Key Takeaways

• Waller’s comments appear to suggest a shift in risk perception, with the labor market viewed as stable and inflation rising.
• Market pricing implies an 86.5% chance of no rate change at the July FOMC meeting, though this is down from 90%.
• Waller’s focus on employment risks over inflation concerns marks a departure from his earlier stance.

What to Watch

Observers should monitor upcoming economic data releases, including CPI and employment figures, as they may influence market expectations ahead of the July FOMC meeting. Any significant shifts in inflation or employment data could prompt adjustments in market pricing. Additionally, further statements from Fed officials, particularly Jerome Powell, could provide insights into the likelihood of rate changes at future meetings.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.