Fed's Waller says rate hike may be needed if core inflation stays hot

Fed Governor Christopher Waller warned that the U.S. central bank may need a near-term rate hike if “core” inflation stays too hot, framing policy as at a “crossroads.” Speaking Monday to the New York Association for Business Economics, Waller said he would focus heavily on upcoming data, starting with the consumer price index report due Tuesday. He cautioned that the Fed should not be “lackadaisical” if inflation readings break the wrong way, arguing that another hot core print would be treated as a signal, not noise. Waller said there remains a credible case for inflation to fall back toward the 2% target under current policy settings, but he is also concerned about evidence that price pressures are broadening beyond last year’s import tariff effects and recent energy increases. He noted that core services—about 75% of core prices—showed nearly 70% of categories with 3- and 12-month inflation above 3%. Waller said it would take several months of lower readings to confirm inflation is moving in the right direction and referenced market pricing of roughly a 40% chance of an increase in July and overwhelming odds by September.