Fed's Waller: More hikes needed, pace can bend, Sept jobs dip not a worry

• Additional increases are still called for, though the tempo can vary.
• Policy tightening does not have to happen at back-to-back sessions.
• Inflation remains too high, with the AI buildout and the ongoing energy shock cited among a series of lasting price pressures.
• The economy is showing signs of strengthening in the second half of 2026.
• He fears inflation, now approaching 5-1/2 years above target, will place inflation expectations at risk.
• The September labor market was 'solid and stable' even though the number of jobs created was lower.
• Additional hikes are expected if data come in as projected.
• Fed communications can skip forward-guidance promises yet still improve outcomes by 'signaling' to markets the policy choices under consideration.

Christopher Waller, a Federal Reserve governor, said additional rate rises will probably be required to bring inflation back to the Fed's 2% target, although the pace of increases can remain flexible, he argued. Speaking at the Istanbul Economic Forum, which is organized by the Central Bank of the Republic of Türkiye, Waller said moves do not have to follow one another at consecutive policy meetings, making a pause at the October 27–28 session possible. Should the data on growth and inflation come in as projected, he sees further increases as ultimately necessary.

Waller's central worry is still persistent inflation and the chance it becomes embedded in expectations. Inflation, he noted, has now held above the Fed's 2% objective for about five and a half years, at the same time as the economy appears to have strengthened in the second half of 2026. He listed several durable price pressures, among them the ongoing energy shock related to the Iran conflict and stronger demand coming from the AI buildout. At the same time, he said the labor market was 'solid and stable' in September even with the slowdown in job creation, adding that the Fed has room to keep its attention on inflation and need not be overly worried about producing a harmful economic slowdown. The FOMC minutes from yesterday contained similar concerns that energy costs and AI-related investment could continue to push prices up.

Waller also took up the subject of forward guidance and how the Fed talks to markets. Rather than tie itself to a fixed path for rates, he said the central bank can flag the choices it is considering and stay free to adjust when new data arrive. Markets, in his view, are then able to form views on the likely direction of policy without the Fed having to stand by pledges it might later be forced to reverse.