“If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said.
Three-month core personal consumption expenditures (PCE) inflation, the metric he said best captures current trend, has fallen from 4.76% in February 2026 to 3.05% through July, a trajectory he described as “encouraging.”
“I’m going to paraphrase John Lennon here: Give disinflation a chance. We can wait one meeting,” Waller said.
“What’s the cost of waiting one meeting? Hiking 25 basis points, one meeting right now, is not going to bring the CPI down to 2%.”
Headline PCE inflation for July stood at 3.7%, with core PCE at 3.3%. Waller said nonmarket services prices — estimated rather than directly observed — are artificially inflating those readings, and a pending methodology revision from the Bureau of Economic Analysis could reduce 12-month PCE inflation by several tenths of a percentage point.
