Federal Reserve Speeches·Jul 13, 2026, 12:30 PM ET

Waller, Monetary Policy at a Crossroads

The U.S. economy shows resilient household spending & business investment despite higher tariffs & Middle East energy price shocks.
The labor market remains stable with employment near the FOMC's maximum goal, though recent data revisions show slower job growth than initially reported.
Core inflation rose from 3 percent in December 2025 to 3.4 percent in May, driven by broad-based increases in both core goods & services.
Headline PCE inflation reached 4.1 percent through May, largely due to elevated petroleum prices that are now declining.
Three primary factors are driving upward inflationary pressure: import tariffs, volatile energy prices, & strong demand for AI-related infrastructure.
Unlike the 2021-2022 period, the current labor market is less tight with a job vacancy-to-unemployment ratio near one-to-one.
Inflation expectations remain well-anchored near the 2 percent target, reducing the risk of a self-fulfilling inflation spiral.
The speaker warns against repeating the 2021 mistake of delaying response to rising inflation while also cautioning against overtightening that could cause a recession.
Future monetary policy decisions will depend on incoming inflation data, with a potential need to tighten rates if core inflation continues to rise.
A credible case exists for inflation to return to target at current policy settings, but data showing persistent elevation would require tighter monetary policy.