Waller: the dots signal where rates go, not how fast; more hikes likely

Serguey Asael Shinder09 October 2026, 08:022 min read

Federal Reserve Governor Christopher Waller used a speech at the Central Bank of Türkiye's forum in Istanbul on 8 October to explain why he backed September's rate rise and how he thinks the Fed should signal what comes next. The views are his own.

Why he changed his mind. The FOMC raised its policy rate by 25 basis points to 3.75–4.00% on 16 September after nine months on hold, having cut 75 basis points in late 2025. Waller says the switch was not a reaction to one data point — the hot August CPI — but to evidence that built over the year: the labour market stabilised, hopes for a quick end to the Middle East conflict faded with experts warning oil could stay high through 2027, the AI build-out was pushing up high-tech consumer prices, and trade conflicts threatened new tariffs. His worry now is expectations: after what will soon be five and a half years above target, consumers, investors and price-setters may revise up their expectations. Latest data, he said, leave the economy roughly where it was in September: a stable labour market, monthly core PCE of 0.25% in August and 3% over twelve months — between 2.5% and 3.0% since spring 2024.

The communication argument. Waller compares three options when tightening: saying nothing (markets might price zero or five hikes), strong forward guidance (for example 25 basis points every other meeting — certain but rigid), and what he calls the "signalling option": indicate roughly how far rates are likely to rise over a period, but not the pace or step size, and keep it data-dependent. He says the Summary of Economic Projections now plays that role.

What the dots say, in his reading. Sixteen of 18 participants anticipate at least one more hike at the two remaining 2026 meetings; four of those expect two. Eight expect rates 50 basis points higher at end-2027 than now. Citing futures as of 7 October, he noted markets saw an 85% chance of at least one hike by December and nearly 20% of two, and nearly 80% of at least two by March 2027.

His bottom line. If data come in as expected he anticipates additional hikes, but "the hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time." For markets, that reads as a direction without a calendar — exactly the signal he argues for.

Source: Federal Reserve, Governor Christopher J. Waller, "The Signaling Value of the Summary of Economic Projections", 8 October 2026 — https://www.federalreserve.gov/newsevents/speech/waller20261008a.htm