Federal Reserve Governor Christopher Waller said on Thursday, September 3, that he would support holding the federal funds target range at 3.50 to 3.75 percent when the Federal Open Market Committee meets on September 15 and 16, provided the August inflation report due September 11 shows prices still cooling. Waller delivered the remarks at 8:30 a.m. Eastern in a speech titled “The Economic Outlook and Some Comments on My Policy Communication,” and he attached an explicit condition to the other side of the trade. “But if inflation comes in hot, I would consider a rate hike,” he said. The governor put a number behind the optimism: core inflation over the three months through July ran at a 3.05 percent annual pace, down from 4.76 percent in February. That is the fastest stretch of disinflation of the current cycle, and it is still well above the Committee’s 2 percent goal. The speech matters because Waller is one of seven sitting governors and votes at every meeting, and because three regional bank presidents already dissented in favor of a quarter-point increase in July. His comments moved the prime rate outlook from a leaning toward tightening back to a genuine coin flip, and they reset the September rate forecast around a single data release that is now one week away.
Key Takeaways
- Waller said he would back holding rates at 3.50 to 3.75 percent if August inflation keeps cooling.
- He would consider a quarter-point hike instead if the August price data reverses that progress.
- Three-month core inflation ran 3.05 percent through July, down from 4.76 percent in February.
- The August Consumer Price Index lands September 11, four days before the FOMC convenes.
- The prime rate has sat at 6.75 percent since the Committee last moved the target range.
What This Article Covers
What Waller Actually Said
Waller opened by conceding the uncomfortable part first. Inflation has run above the Committee’s 2 percent goal for five and a half years, he said, and it remains meaningfully above that goal today. What has changed, in his reading, is the direction. Recent data “suggest we are finally seeing some signs of disinflation,” and he was explicit about what that would buy the Committee. If the improvement holds in the data arriving over the next two weeks, he would be inclined to support leaving the target range alone. If August shows the improvement was fleeting, he said, it may be appropriate to raise the policy rate on September 16.
The hedge is doing real work. Waller told the audience that he judges current policy to be only slightly restricting aggregate demand, which is a lower bar than most tightening cycles set. “It may not take much acceleration in inflation to nudge me into supporting tighter policy,” he said. He framed a quarter-point move as a small adjustment meant to restart progress rather than a pivot to a hiking campaign. In a Reuters interview after the speech he sharpened it further, saying he is willing to sit and wait, but that a reversal in the inflation trend would be the signal to move. Waller votes at every meeting because he sits on the Board of Governors, so the conditions he laid out are not commentary. They are a published vote.
The Inflation Math Behind the 3.05 Percent
The headline figures still look hot. Personal consumption expenditure prices rose 3.7 percent over the twelve months through July, and the core measure that strips out food and energy rose 3.3 percent. Waller argued those twelve-month readings are the wrong lens for a turning point because they average in shocks that have already passed through. He pointed instead at the three-month annualized core rate, which stood at 3.05 percent through July after starting the year at 4.76 percent in February. Month to month, PCE prices ticked down 0.1 percent from May to June and rose 0.2 percent from June to July, with core matching that 0.2 percent July pace.
He then made a second argument that is likely to draw scrutiny. Roughly half the July increase in core prices came from nonmarket services, a category the Commerce Department imputes rather than observes in actual transactions. Waller has objected to that component for years and said underlying inflation is doing better than the core numbers suggest once it is set aside. He also flagged a pending methodology change in how the department estimates fees paid to stock market traders, which he expects could subtract a few tenths of a percentage point from twelve-month PCE inflation. Our inflation tracker follows both the headline and core series as each release lands.
Where the Rest of the Committee Stands
Waller is not speaking into a vacuum. The FOMC held the target range at 3.50 to 3.75 percent on July 29 by a 9 to 3 vote, and all three dissenters, Beth Hammack, Neel Kashkari and Lorie Logan, wanted a quarter-point increase at that meeting. Six days before Waller spoke, Chair Kevin Warsh used his Jackson Hole address to set a demanding test: the Committee must be confident that underlying inflation is moving to its objective clearly and at sufficient speed, and otherwise it has work to do. Warsh also blamed the central bank directly for 65 months of elevated inflation.
The two men also split on process. Warsh has resisted committing to an explicit interest rate path, arguing that published reaction functions work better in theory than in practice. Waller devoted the back half of his speech to defending the opposite habit, comparing a reaction function to a baseball umpire’s strike zone: players do not need it to be perfect, only stable enough to plan around. He agreed with Warsh that formal forward guidance is not warranted now. New York Fed President John Williams struck a similar wait-and-see note on September 2. According to CME FedWatch data reported by the Associated Press, traders had priced a September increase at close to 65 percent on Wednesday, then cut it to roughly even odds after Waller finished. The next scheduled FOMC meeting runs September 15 and 16.
What a Hold or a Hike Does to Your Rates
The prime rate is the transmission belt. It has sat at 6.75 percent since the Committee last moved the target range, because banks set prime at three percentage points above the upper bound of the federal funds target. A hold on September 16 leaves it there. A quarter-point increase lifts it to 7.00 percent, usually within a day or two, and variable-rate credit card APRs and home equity lines reprice on the next statement cycle. That mechanism is spelled out in our guide to how Fed decisions reach consumer loans.
Longer-term borrowing costs have already moved without waiting for the Committee. The two-year Treasury yield closed at 4.39 percent on September 2 and the ten-year at 4.79 percent, both up from 4.20 and 4.67 percent on August 27. Freddie Mac put the average 30-year fixed mortgage at 6.71 percent in the survey published September 3, five basis points above the prior week, so current mortgage rates have already absorbed part of a hike that has not happened. Savers see the mirror image. Treasury sold four-week bills on September 3 at a 3.700 percent discount rate, up from 3.650 percent a week earlier, which keeps pressure under CD rates and high-yield savings yields.
Pro Tip
If you are carrying a variable-rate balance, the window between now and September 16 is the cheap one. Ask your issuer what your APR becomes if prime moves to 7.00 percent, then decide whether a fixed-rate consolidation loan beats that number. If you are shopping for a CD instead, a shorter term keeps you free to reprice after the Committee acts, while a longer term locks today’s yield in case August inflation cools and the hike case fades.
Frequently Asked Questions
Will the Fed raise interest rates in September 2026?
It is not decided. The FOMC meets September 15 and 16 with the target range at 3.50 to 3.75 percent. Governor Christopher Waller said on September 3 that he would support a hold if the August inflation report due September 11 shows continued cooling, and would consider a hike if it does not.
What is the next Fed interest rate prediction?
The Fed publishes no official prediction. What exists is market pricing and the conditions individual policymakers state out loud. The Associated Press reported that CME FedWatch odds of a September increase sat near 65 percent on September 2 and fell to roughly even after Waller spoke the next morning. Those odds move again on September 4 with the August jobs report and on September 11 with the August Consumer Price Index.
Will Kevin Warsh raise interest rates?
Warsh chairs the Committee but casts one vote among twelve, so he cannot raise rates alone. At Jackson Hole on August 28 he said the Committee must be confident that underlying inflation is moving to its objective clearly and at sufficient speed, and that otherwise it has work to do. Three regional bank presidents already voted for a quarter-point increase in July. Waller leaning toward a hold narrows the path to a majority.
What does a rate hike do to my credit card APR?
Almost every variable-rate card in the United States is priced as the prime rate plus a fixed margin. Prime is 6.75 percent today. If the Committee raises the target range by a quarter point, banks move prime to 7.00 percent within a day or two, and your APR rises by the same 0.25 percentage points on the next statement cycle. On a 5,000 dollar revolving balance that is roughly 12.50 dollars more interest a year, which compounds if the balance persists.
Will mortgage rates go under 4 percent?
Not on any horizon the current data supports. Freddie Mac reported the 30-year fixed average at 6.71 percent on September 3, and the ten-year Treasury yield that anchors mortgage pricing closed at 4.79 percent on September 2. A 4 percent mortgage would require the ten-year to fall toward roughly 2 percent, which historically accompanies a recession or a sustained return of inflation to target. Neither is in the September data.
Should I lock a CD rate before the September meeting?
It depends on which outcome would hurt you more. If the Committee holds and inflation keeps cooling, deposit yields drift lower from here and locking today looks smart. If it raises the target range, banks reprice new CDs upward within weeks and you will have given up that increase. Splitting a deposit across a short term and a longer term hedges both directions without requiring you to guess the September 16 vote.
Watching the Two Releases That Decide This
Two data points now carry the September meeting. The August employment report arrives September 4 at 8:30 a.m. Eastern, and Waller told his audience he does not expect it to deviate much from the recent pattern of roughly 60,000 jobs a month. The August Consumer Price Index lands September 11, four days before the Committee convenes, and by Waller’s own framing it is the release that decides his vote. Follow the prime rate, the Treasury yield curve and our 2026 rate forecast as each one prints.
References
- Federal Reserve Board, Governor Christopher J. Waller speech, September 3, 2026 https://www.federalreserve.gov/newsevents/speech/waller20260903a.htm
- Federal Reserve Board, FOMC statement, July 29, 2026 https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm
- Federal Reserve Board, Chair Kevin Warsh, “In Our Time,” Jackson Hole, August 28, 2026 https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm
- Federal Reserve Board, FOMC meeting calendar https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
- U.S. Bureau of Labor Statistics, Schedule of Selected Releases for September 2026 https://www.bls.gov/schedule/2026/09_sched_list.htm
- FRED, St. Louis Fed, Bank Prime Loan Rate (DPRIME) https://fred.stlouisfed.org/series/DPRIME
- FRED, St. Louis Fed, 30-Year Fixed Rate Mortgage Average (MORTGAGE30US) https://fred.stlouisfed.org/series/MORTGAGE30US
- TreasuryDirect, auction announcements, data and results https://www.treasurydirect.gov/auctions/announcements-data-results/
- PBS NewsHour and the Associated Press on Waller and CME FedWatch pricing, September 3, 2026 https://www.pbs.org/newshour/economy/fed-governor-waller-muddies-outlook-on-possible-rate-hike-later-this-month
