Federal Reserve Governor Christopher Waller signaled on Monday that while the central bank must remain prepared to raise interest rates, policymakers should avoid overreacting to recent inflation spikes driven by tariffs and energy costs.
Waller cautioned against "fighting the last war," suggesting that the Fed needs more data before committing to a tightening cycle.
The comments come as markets digest the possibility of a policy pivot.
Waller’s remarks introduce a degree of nuance to the hawkish tone that has emerged from the Fed recently.
By distinguishing between transitory price shocks and entrenched inflation, the governor implies that the central bank may tolerate short-term volatility if the underlying trend remains manageable.
This stance could provide some relief to investors who have been pricing in aggressive rate hikes.