Fed Governor Waller Says He Will Be ‘Inclined’ To Keep Rates Unchanged If Inflation Data Doesn’t Surprise

Federal Reserve Governor Christopher Waller said he's leaning toward keeping interest rates steady at the next central bank meeting in mid-September.

Speaking to Reuters, he noted that inflation is "meaningfully above" the Fed's 2% target, but claimed that current trends "suggest we are finally seeing some signs of disinflation."

"If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting," Waller added.

However, he did say that "it may not take much acceleration in inflation to nudge me into supporting tighter policy."

"If there is evidence that progress toward 2% inflation reversed in August, a small adjustment in our stance would help ensure that it resumes," Waller said.

Other Fed members, however, have struck a more hawkish tone. Michael Barr said this week he will support an interest rate hike if inflation doesn't ease.

Speaking at a banking forum in Washington, Barr, who votes on FOMC decisions, said he's concerned about "broader price pressures taking hold."

"If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."

Fed Chair Kevin Warsh also appeared to anticipate he is prepared to support a more hawkish policy if prices remain above the central bank's target.

Speaking at the Jackson Hole symposium last week, Warsh said that even though recent inflation readings have been "better than expected, they do not tell me that underlying trends have meaningfully improved." He claimed that if the trend doesn't move down in the future, the central bank will have "work to do."

However, he did not offer guidance about the central bank's next moves, speaking against "oversharing" policy deliberations.

Other officials have been clearly calling for higher rates for longer. Kansas City Federal Reserve President Jeffrey Schmid said last week that inflation is "still stubborn and it's still sticky," and the central bank has not yet managed to "break through."

Schmidt, who does not vote on FOMC decisions, added that Fed members will "have our work cut out for us as we move into the cycle."

Cleveland Federal Reserve president Beth Hammack also said earlier this month that more than one interest rate hike could be needed. She claimed last Thursday that "now is the time" to act on the matter.