Fed Governor Waller Urges Dropping Rate-Cut Bias Amid Inflation

A senior Federal Reserve official has called for the central bank to abandon its stated bias toward future interest rate cuts, arguing that the next policy move is just as likely to be a rate increase given persistent inflation pressures. Governor Christopher Waller made the case in a speech delivered Friday in Frankfurt, Germany, marking a significant shift in his own policy stance.

Waller stated he is not advocating for an immediate rate hike but believes the Fed should hold its benchmark rate steady until there is clearer evidence inflation is returning to the 2% target. He pointed to recent data, including an April inflation reading he estimated at 3.8%, as evidence that price pressures are broadening beyond energy costs linked to geopolitical conflict.

"Inflation is not headed in the right direction," Waller said in his prepared remarks. "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."

The governor, who had previously been an advocate for lowering rates to support the labor market, said his view has changed due to consecutive strong...