Federal Reserve Governor Christopher Waller said Friday he can no longer rule out voting for future interest-rate increases [1].
This shift in tone suggests the U.S. central bank may move away from its previous expectation of lowering borrowing costs. If the Federal Reserve pivots toward higher rates, it could increase costs for consumers and businesses while tightening financial conditions to combat persistent price increases.
Waller said these comments during a speech in Germany on May 22, 2026 [1, 2]. He said that he believes the Federal Reserve needs to "axe the easing bias from the policy statement" [3]. This refers to the central bank's tendency to signal that future moves are more likely to be rate cuts than hikes.
The governor indicated that current economic data is concerning. He said that "inflation is not headed in the right direction" [4]. Because inflation is not slowing as expected, Waller said that the risk of price instability remains a primary concern for policymakers.
While Waller is not advocating for immediate rate hikes, he cautioned that the possibility must remain on the table. He said, "I can no longer rule out rate hikes further down the road if inflation does not abate soon" [5].
The Federal Reserve typically uses its policy statements to guide market expectations. By removing an easing bias, the Fed would be signaling a more neutral or restrictive stance, one that does not assume rates will necessarily fall.
Waller's remarks highlight a growing tension within the central bank regarding the timing and direction of monetary policy. The shift comes as officials struggle to bring inflation down to target levels without triggering a broader economic downturn.
“"inflation is not headed in the right direction."”
Waller's shift represents a significant hawkish turn for a key Fed governor. By suggesting that rate hikes are once again a possibility, he is signaling to financial markets that the era of guaranteed rate cuts may be over. This creates uncertainty for investors and suggests that the Federal Reserve may prioritize fighting inflation over supporting economic growth in the near term.
