Fed's Waller Expects More Rate Hikes to Bring Inflation Back to 2%

Federal Reserve Governor Christopher Waller said on Thursday, Oct. 8, that he expects the Fed to raise interest rates further. "If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2 percent goal," Waller said in a speech at the Istanbul Economic Forum hosted by the Central Bank of the Republic of Türkiye, according to the text posted by the Fed.

He added that "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." The speech, titled "The Signaling Value of the Summary of Economic Projections," came a day after minutes of the Fed's September meeting showed most officials saw another hike as likely by year-end.

What changed Waller's view on rates?

Waller said the September hike was "the culmination of factors that developed over the past year," not a reaction to one data point. In September, the Federal Open Market Committee raised its target range by 25 basis points to 3.75% to 4% after nine months on hold. Waller voted for the move, according to the minutes.

He listed three forces that undermined his confidence in falling inflation:

Hopes for a quick end to the Middle East conflict faded, and experts warned oil prices could stay high through 2027.
Evidence mounted that the artificial intelligence buildout "was significantly driving up high-tech consumer prices."
Continuing trade conflicts "threatened new tariffs that could put upward pressure on inflation yet again."

He said he is "not greatly concerned that tighter monetary policy threatens a damaging slowdown in the economy." His worry is that inflation, after "what soon will be five and a half years of it above the FOMC's target," will push consumers, investors and businesses to raise their expectations for future inflation.

How does Waller see the economy now?

Waller said he sees the economy "in roughly the same place" as at the September meeting. He said the September jobs report showed a labor market that "continued to be solid and stable." August inflation data, which included revisions to the government's methodology, showed monthly core PCE inflation of 0.25% and a 12-month rate of 3%, he said. "For at least the near term, policy will be focused on the inflation side of our mandate," Waller said.

What is the "signaling option"?

Waller described a middle path between saying nothing about future rates and committing to a fixed schedule. Under this "signaling option," policymakers indicate roughly how far rates are likely to rise over a period of time but leave the pace and size of each move to incoming data. He said the Fed's Summary of Economic Projections is "serving that signaling role."

September projections, as cited by Waller	Count
Participants submitting rate projections	18
Saw at least one more hike in 2026	16
Of those, saw two more hikes	4
Saw rates 50 basis points higher at end of 2027	8

Source: Waller speech, Oct. 8, 2026, citing the September Summary of Economic Projections.

Citing futures prices as of Oct. 7, Waller said traders saw an 85% chance of at least one hike by the end of the December meeting and nearly a 20% chance of two. By the March 2027 meeting, he said, markets saw nearly an 80% chance of at least two hikes.

Where Treasury yields stand

The 10-year Treasury yield closed at 5.28% on Oct. 7, and the 2-year at 4.77%, according to the Treasury's daily par yield curve. The 30-year closed at 5.67%. Treasury reopens $22 billion of 30-year bonds at 1 p.m. ET today, according to TreasuryDirect; the same bond sold at a 5.308% high yield on Sept. 10. The Fed's next meeting is Oct. 27–28; see our Fed calendar for 2026–27 and the Rates and Policy section.