Fed Governor Waller Indicates Potential Pause on Rate Hikes Amid Economic Stability
What happened
Federal Reserve Governor Christopher Waller indicated a potential pause on rate hikes during his speech in Istanbul.
The Context
- Data-Dependent Approach: Waller emphasized that future rate hikes will depend on incoming economic data, allowing for flexibility in timing.
- Recent Rate Increase: The FOMC raised the policy rate by 25 basis points in September, bringing it to a range of 3.75-4%.
- Market Expectations: An 85% probability of at least one additional rate hike by December has been priced into the markets, but Waller's comments suggest a cautious approach.
The Number
— This is the probability priced by federal funds futures markets for at least one rate hike by the end of December 2026, indicating significant market anticipation of Fed actions.
Takeaway
Expect the Fed to maintain a steady policy rate in October, with potential adjustments in December based on economic data.
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Fed officials didn’t make an urgent case for an immediate follow-on rate hike after raising interest rates in September, according to the minutes of the meeting.
The Federal Reserve's recent meeting minutes indicate that officials did not advocate for an immediate follow-on interest rate hike after the increase in September, suggesting that further adjustments may be postponed until December.