Fed Governor Waller Says Rate Projections Signal Path Without Locking Moves

Federal Reserve Governor Christopher J. Waller said the central bank’s rate projections can guide markets toward policymakers’ likely destination while preserving flexibility as economic conditions change.

Waller made the remarks Oct. 8 while discussing the Federal Reserve’s quarterly Summary of Economic Projections. “The Summary of Economic Projections (SEP) is serving that signaling role for policymakers,” he said.

The September projections showed 16 of 18 participants expected at least one more rate increase during the two remaining Federal Open Market Committee meetings in 2026. Four participants projected two additional increases.

The Federal Open Market Committee voted 12-0 on Sept. 16 to raise its federal funds target range by 25 basis points to 3.75%-4%, ending a nine-month pause. The committee said economic activity was expanding at a solid pace, while inflation remained elevated and uncertainty was high in part because of geopolitical developments.

The September SEP placed the median federal funds rate projection at 4.1% at the end of 2026 and 2027, 3.9% at the end of 2028, 3.6% at the end of 2029 and 3.2% over the longer run.

Eight participants expected the federal funds rate to be 50 basis points higher at the end of 2027 than its current level. Waller said those projections do not establish when individual rate moves would occur. They could reflect increases early in 2027 followed by cuts later in the year.

Federal-funds futures pricing on Oct. 7 implied an 85% chance of at least one rate increase by the December meeting and nearly a 20% chance of two increases, Waller said. By the March 2027 meeting, pricing implied nearly an 80% chance of at least two increases and a 33% chance of three or more.

“This signaling helps to anchor the path of short-term interest rates but provides flexibility in adjusting rate hikes based on incoming data,” Waller said.

The SEP is released four times a year and summarizes individual FOMC participants’ projections for economic growth, unemployment, inflation and the appropriate federal funds rate. It reflects individual assessments rather than a binding commitment or a precise forecast of the path between meetings.

The comments extend Waller’s earlier discussion of data-dependent rate increases, while leaving the timing of any future move open.