Fed Policymaker Comments Raise the Stakes for Inflation Data

Our baseline outlook still sees the Fed on hold through 2026 amid gradually easing price pressures. But Waller’s comments suggest that after a string of firmer Personal Consumption Expenditures (PCE) inflation prints, the Fed now places greater emphasis on responding if inflation surprises sharply to the upside or proves more persistent than expected, regardless of which factors are driving the inflation. And this raises the stakes for incoming inflation data throughout the year.