Waller sets the tone for Tuesday's CPI: Hot inflation would support a near-term rate hike

Federal Reserve Governor Christopher Waller said Monday that if future data indicates inflation remains well above the 2% target, the Fed may need to raise interest rates in the "near term." He described current monetary policy as being at a "crossroads." Waller stated that this direction will be determined by new information, including Tuesday's CPI report, and noted that the Fed is at a stage where it should not be "complacent" if data trends take an unfavorable turn.

"At the current policy level, it is still possible for inflation to gradually fall back to the 2% target," Waller said. "But I am equally concerned about another equally plausible scenario, where data over the coming weeks shows inflation remaining elevated or even continuing to rise. This would require tighter monetary policy in the near term." He specifically expressed concern that recent inflation reports suggest price pressures appear to be broadening across the economy, extending beyond the impact of last year's tariff increases or recent energy cost hikes, potentially reflecting more widespread systemic inflation that would necessitate tighter monetary policy.

Waller added, "If core inflation is hot again this week, the FOMC will have to consider tightening monetary policy in the near term. We need to see inflation data decline persistently over several months to believe that inflation is moving in the right direction." (Jin Shi)