Federal Reserve Governor Christopher Waller said in a speech on Thursday that if economic data meets expectations, he anticipates the Fed will need to continue raising interest rates to push inflation lower more quickly.

Speaking at the Istanbul Economic Forum hosted by the Central Bank of the Republic of Turkey, Waller stated: "If economic data continues to meet expectations, I expect further rate hikes to bring inflation back to the 2% target in a more timely manner. However, there is some flexibility on the timing of rate increases — they need not occur at consecutive policy meetings, but should be completed within a reasonable time window."

Waller pointed to multiple interwoven factors creating persistent inflationary pressure: markets had originally hoped the Middle East conflict would end quickly, but with low inventories and damaged infrastructure, related tensions could persist until 2027. He also noted that the expansion of the AI industry has significantly boosted related capital expenditures, with projected project scales continuing to balloon. Additionally, potential risks from new tariff policies could once again add upward pressure on inflation.

"The CPI data released ahead of the September Federal Open Market Committee (FOMC) meeting came in well above expectations, making it impossible to deny: inflation remains too high, and progress toward the policy target is insufficient," Waller said.

Waller believes the U.S. economy will remain strong in the second half of this year, and regarding the risk that high interest rates could significantly drag down the economy, he is "not very concerned."

"But what worries me is that inflation has been above the FOMC's target for five and a half consecutive years, and is now accelerating again, which will prompt consumers, investors, and pricing firms to raise their future inflation expectations," he said. Current economic conditions are broadly in line with those at the Fed's mid-September policy meeting.

"Overall, the latest data confirm my assessment: the labor market remains stable, but inflation is still too high. At least in the short term, the policy focus will be on the inflation mandate," Waller said.

Waller also shared his views on how the Fed should communicate its policy path to the public. He argued that the Fed should neither stay silent nor send strong signals of certain action to the market. He prefers a middle-ground communication approach: signaling the approximate total magnitude of rate hikes over a period of time, without specifying the pace or the size of individual increases. This approach preserves policy flexibility while still conveying information to the public.

"We can emphasize that the monetary policy path is not predetermined — everything depends on subsequent economic data."

"Policymakers can signal the general direction of policy while acknowledging that there is no fixed terminal rate level. The sole ultimate goal of policy is to achieve price stability and full employment."