Overview
- Christopher Waller, a Federal Reserve governor, said the Fed should be prepared to tighten short-term interest rates if underlying inflation measures remain elevated.
- Waller singled out core inflation that excludes food and energy as his main concern and said the rate-setting committee should consider action if core readings stay high.
- The Fed's preferred PCE price index rose 4.1% in May, roughly double the central bank’s 2% target, which Waller cited as evidence the Fed must avoid repeating the 2021–22 inflation episode.
- Investors reacted to Waller’s comments by increasing the odds of a near-term rate increase according to the CME FedWatch indicator even though a narrow majority still expects no change at the next meeting.
- Waller’s remarks mark a shift from his earlier, more dovish reputation and come as the new Fed leadership and upcoming CPI and Fed meetings will determine whether his stance leads to actual policy tightening.