Fed’s Waller says next move as likely to be rate hike as cut

Published Fri, May 22, 2026 · 11:04 PM

FEDERAL Reserve Governor Christopher Waller said he supports making clear the central bank’s next interest-rate move is just as likely to be an increase as a cut, as the energy shock from the Iran war pushes up prices.

Waller said his current position is to be patient in holding rates until the war’s impact is clearer, but he warned on Friday that he wouldn’t rule out a future rate hike if inflation doesn’t start to slow soon.

“Inflation is not headed in the right direction,” Waller said on Friday in a speech titled Policy Risks Have Changed delivered at a conference in Frankfurt. “Based on this recent data, I would support removing the ‘easing bias’ language in our policy statement to make it clear that a rate cut is no more likely in the future than a rate increase.”

Waller said the oil shock could dissipate soon, but, he added, “I can no longer rule out rate hikes further down the road if inflation does not abate soon.”

At its April policy meeting, the Federal Open Market Committee elected to leave its benchmark federal funds rate unchanged in a range of 3.5 per cent to 3.75 per cent.

But the decision prompted dissents from three policymakers who objected to the so-called “easing bias” in the post-meeting statement’s language suggesting the Fed will eventually resume rate cuts.

Minutes from that meeting showed a majority of Fed officials warned the central bank would likely need to consider raising rates if inflation continued to run persistently above their 2 per cent target.

Since the April policy decision, stronger-than-expected data on employment and faster-than-expected inflation figures have reinforced the notion that price pressures remain the bigger risk from the conflict than a sharp growth slowdown.

Waller described the labour market as stabilising, but not booming, and said he views the current level of the Fed’s benchmark as having a restrictive effect on the US economy.

Still, he said the bigger driver of policy now is the inflation outlook, which hinges on the ultimate duration of the war.

“If I believe inflation expectations start to become unanchored, I would not hesitate to support an increase in the target range for the federal funds rate,” Waller said. “But at this point that action is premature. It is time to simply sit and watch how the conflict and the data evolve.”

Waller’s remarks come hours before Kevin Warsh was expected to be sworn in as the new Fed chair in a White House ceremony. BLOOMBERG