Federal Reserve Governor Christopher Waller struck a dovish tone on September 3, stating that the labor market remains strong and three-month core inflation has shown "significant improvement." He emphasized that the September rate decision will be "highly dependent" on the August CPI data due next week. If inflation continues to progress toward the 2% target, he supports holding rates steady; if data comes in higher than expected, he would consider a rate hike. However, he noted that accelerating inflation might not necessarily prompt a tightening move. Additionally, a pending revision to the Commerce Department's estimate of non-market prices could lower the 12-month PCE by a few tenths of a percentage point.
Federal Reserve Governor Christopher Waller turned dovish on September 3 after previously signaling possible support for a rate hike. He said the labor market is in good shape and expected the August employment report to continue that trend. Three-month core inflation showed "significant improvement" at an "encouraging" pace. He argued that headline and core PCE are not the best indicators for inflation direction. A pending revision to the Commerce Department's estimate of non-market prices could lower the 12-month PCE by a few tenths of a percentage point.
Regarding the September rate decision, Waller said it will be "highly dependent" on the August inflation data released next week. "If we continue to make progress toward the 2% target, then I would be willing to support keeping the policy rate at its current level. But if inflation data comes in higher than expected, I would consider a rate hike. An acceleration in inflation may not necessarily prompt me to support tightening. If there is evidence in August that the momentum toward the 2% target has reversed, then a small adjustment to our policy stance would help ensure inflation returns," he said.
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