Federal Reserve Governor Chris Waller stated on Thursday that he expects additional interest rate hikes may be necessary to reduce inflation more rapidly, depending on upcoming economic data. Speaking at the Central Bank of the Republic of Türkiye İstanbul Economic Forum, he said, "If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2% goal." Waller noted that these hikes do not need to occur at consecutive meetings, but should happen within an acceptable timeframe.
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He identified several factors contributing to persistent inflation, including expectations for a quick resolution to the Middle East conflict and concerns that low inventories and damaged infrastructure might keep oil prices elevated until 2027. Waller also highlighted that the expansion of artificial intelligence has significantly increased high-tech consumer prices. Additionally, ongoing trade disputes could lead to new tariffs, posing further upward pressure on inflation.
Reflecting on recent data, Waller expressed that the August inflation reading, which was higher than anticipated, underscores that inflation remains a concern. He sees economic activity strengthening in the latter half of this year and is "not greatly concerned" that raising interest rates will drastically slow the economy. However, he is worried that the recent rise in inflation could lead consumers and businesses to adjust their expectations for future inflation.
Waller reiterated that he views the economy as being in a similar position to that observed during the Fed's policy meeting in mid-September. He concluded that the focus of policy will remain on addressing inflation for the near term. Additionally, Waller advocated for a nuanced approach in how the Fed communicates its interest rate plans, suggesting that signaling the number of anticipated rate hikes over time, without detailing their timing or magnitude, would provide flexibility while keeping the public informed.