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Economy

Fed’s Musalem and Waller Say More Rate Hikes Will Likely Be Needed to Bring Inflation to 2%

St. Louis Fed President Alberto Musalem and Fed Governor Christopher Waller said Thursday that further rate increases will likely be needed to return inflation to 2%, while leaving open a pause at the October 27-28 meeting.

By admin Oct. 8, 2026 · 2:45 PM ET 2 min read

Exterior of a neoclassical central bank building with stone columns, steps and an American flag on a clear morning, with indistinct pedestrians on the sidewalk.

Two senior Federal Reserve officials said on Thursday that the central bank will likely need to raise interest rates further to bring inflation back to its 2% target, even as they left open the possibility of holding steady at the next policy meeting later this month.

St. Louis Fed President Alberto Musalem, speaking at an event hosted by Bloomberg in New York, said bringing inflation back to target in a timely way would require additional policy firming, according to Reuters. Asked about the late-October meeting, he said he had not prejudged the decision and would approach it with an open mind.

A likely December decision point

Fed Governor Christopher Waller made a similar case in remarks prepared for a central banking forum in Istanbul. He said he expects further increases if incoming data evolve as anticipated, but stressed that the timing is flexible and that hikes do not have to arrive at consecutive meetings.

The comments align with recent signals from other officials suggesting the policy rate, currently in a 3.75% to 4% range after a quarter-point increase in September, may stay unchanged on October 27-28, with another increase possible in December if growth remains firm, unemployment stays low, and inflation shows little progress. Investors currently expect a hold in October and a hike at the December 8-9 session, according to Reuters.

Why officials want to keep tightening

Waller pointed to a strengthening economy in the second half of the year, an unresolved energy price shock linked to the Iran war, and added price pressure from the artificial intelligence buildout, which is lifting demand for key goods and services. He said his main concern is that a recent pickup in inflation could push consumers, investors, and businesses to expect higher prices ahead.

Musalem did not say in Thursday’s remarks how much further the policy rate may need to rise. Inflation remains more than a percentage point above the Fed’s target, according to Reuters.

Reporting based on coverage by Reuters.

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