Christopher J Waller: Monetary policy at a crossroads
Speech by Mr Christopher J Waller, Member of the Board of Governors of the Federal Reserve System, at the New York Association for Business Economics, New York City, 13 July 2026.
Title: Monetary policy at a crossroads
Christopher J Waller, a member of the Board of Governors of the Federal Reserve System, addressed the New York Association for Business Economics on July 13, 2026. Waller discussed the outlook for the U.S. economy and the implications for monetary policy.
Household and business spending have been resilient, despite higher goods costs due to tariffs and increased energy prices stemming from the Middle East conflict. The labor market has remained stable, with employment close to the Federal Open Market Committee's (FOMC) maximum-employment goal. Waller believes the real side of the economy is in good shape.
However, Waller feels inflation and monetary policy are at a critical juncture. Core inflation held steady for much of the year despite higher tariffs in 2025. But it began to rise in January and accelerated after the Middle East conflict disrupted petroleum and commodity production and transportation. Waller is concerned about the rapid pace of core inflation this year, which has increased from 3 percent in December 2025 to 3.4 percent in May.
The question is whether core inflation will continue its upward trend or reach a turning point where it declines back toward the 2 percent target. Waller is wary if this upward trajectory persists, as it could be challenging to bring inflation back to the Committee's 2 percent goal with monetary policy at its current level.
Waller emphasized that past mistakes, such as not responding sooner to high inflation in 2021, must not be repeated. He argued that assessing current economic conditions is crucial and not just relying on past experiences to guide policy decisions.
Despite elevated inflation, Waller sees resilience in consumer spending powered by energy prices falling from their April highs. He expects continued strong investment in artificial intelligence (AI) and solid consumer spending growth. However, he is unsure about the labor market, with recent data showing a significant drop in the prime-age labor force participation rate, though broader measures suggest this may be an anomaly.
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