Fed Governor Christopher Waller says more hikes lie ahead as inflation holds above 2%, with no fixed schedule for tightening
Federal Reserve Governor Christopher Waller signaled Thursday that the September rate increase is not the ceiling of this tightening cycle, calling for additional hikes while keeping the calendar open to data.
Addressing the Central Bank of Türkiye's Istanbul Economic Forum, Waller 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. But there is some flexibility about when those hikes will occur. The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time."
What's behind the Federal Reserve's September hike?
Three compounding forces drove Waller's September vote:
- a Middle East conflict projected to keep oil prices elevated through at least 2027
- an artificial intelligence (AI) buildout inflating high-tech consumer prices, and
- renewed tariff threats from continued trade disputes
Core personal consumption expenditures (PCE) inflation stood at 3% year-over-year and 0.25% monthly as of August, well above the Fed's 2% target.
On recession risk, Waller was unequivocal. "With evidence that economic activity is strengthening in the second half of this year, I am not greatly concerned that tighter monetary policy threatens a damaging slowdown in the economy," he said.
"But I am concerned that the recent acceleration in inflation — after what soon will be five and a half years of it above the FOMC's target — will lead consumers, investors, and price-setting businesses to revise up their expectations for future inflation."
Where are mortgage rates headed next? Selma Hepp, chief economist at Cotality, says the base case still points to lower mortgage rates over time, but inflation, bond yields, and geopolitical uncertainty continue to create significant volatility. https://t.co/FHN37YJIKP
— Mortgage Professional America Magazine (@MPAMagazineUS) October 8, 2026
Signaling, not forward guidance
Waller defended the Fed's practice of signal-based communication as a middle ground between silence and binding commitments.
"Policymakers could signal where they are likely headed while acknowledging that there is no fixed final destination — except for the achievement of price stability and maximum employment," he said.
"This signaling helps to anchor the path of short-term interest rates but provides flexibility in adjusting rate hikes based on incoming data."
Futures markets priced an 85% probability of at least one hike before December.
For brokers managing client conversations, Melissa Cohn, regional vice president at William Raveis Mortgage and a 44-year industry veteran, offered a counterintuitive read in a Mortgage Professional America analysis on why mortgage rates could fall as the Fed hikes.
"Remember: at the beginning of the last rate-cutting cycle, mortgage rates actually went up when the Fed was cutting rates. I think there's a very good reason mortgage rates could go down if the Fed actually does raise rates," she explained.
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