Fed’s Waller suggests PCE inflation may be overstated, revisions could lower figures

Federal Reserve Governor Christopher Waller has indicated that both headline and core Personal Consumption Expenditures (PCE) inflation figures may be overstating actual inflation levels. Waller noted that upcoming revisions could potentially lower the 12-month PCE by a few tenths of a percentage point. He also described the recent improvement in the three-month core inflation rate as “encouraging”, while downplaying the impact of energy prices and tariffs on ongoing inflation pressures. Waller’s comments come amid ongoing discussions about the Federal Reserve’s interest rate policy, with markets closely watching for indicators that could suggest a shift towards rate cuts.

Key Takeaways

• Waller’s remarks appear to suggest that current inflation measures might be overstated, potentially easing concerns about persistent inflation.
• The comments on improving core metrics could indicate a higher likelihood of a dovish stance from the Fed in upcoming meetings.
• Market pricing seems consistent with expectations for a possible shift towards rate cuts if inflation pressures continue to moderate.

What to Watch

Market participants will be attentive to any further commentary from Federal Reserve officials, as well as upcoming inflation data releases that could confirm or contradict Waller’s assessment. The Federal Open Market Committee’s meetings in September and October will be critical, with any indication of a shift in policy likely to impact market expectations. Additionally, revisions to PCE data could play a significant role in shaping future monetary policy decisions.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.