Federal Reserve Governor Christopher Waller signaled on Thursday that he is leaning toward maintaining current interest rates at the central bank’s upcoming September meeting, provided that incoming economic data remains stable. In a candid conversation with Reuters, Waller suggested that while inflation still sits meaningully above the Federal Reserve’s two percent goal, recent trends indicate that disinflation is finally taking hold. Using a playful nod to John Lennon, he urged his colleagues to give disinflation a chance, arguing that waiting one more meeting would carry little risk compared to the potential disruption of an unnecessary rate hike.

This perspective marks a subtle but notable shift away from the more cautious tone set recently by Chairman Kevin Warsh. While Warsh had previously suggested that soft monthly readings might not reflect a meaningful improvement in underlying trends, Waller believes the situation is better than the surface numbers imply. He pointed out that when looking at shorter timeframes through the Fed’s preferred gauges, there has been a significant downward trajectory since February. According to Waller, certain estimated service prices may be artificially inflating official figures, masking actual progress in cooling the economy.

The financial markets reacted swiftly to these comments, with expectations for a rate hike on September 15 and 16 dropping significantly. Traders shifted their bets almost immediately after Waller indicated his preference for stability, reflecting a broader hope that the aggressive tightening cycle may be pausing. Despite this optimism, Waller maintained a degree of caution, admitting that he could change course if new evidence suggests inflation began to reverse in August.

All eyes now turn to next week’s release of the consumer and producer price indexes from the Bureau of Labor Statistics. These critical reports will serve as the final pieces of evidence before policymakers meet to decide whether to tighten policy further or stand pat. For now, it appears Waller is willing to bet on patience, believing that a slight restriction on aggregate demand is sufficient until more definitive proof arrives.