• Federal Reserve Governor Christopher Waller indicates economic conditions have shown little change since the last FOMC meeting.
  • Inflation is not viewed as a major problem, with the annual rate at 3% in September, as labor market weakness continues to dampen price pressures.
  • The data-dependent Fed appears positioned for a cautious, wait-and-see approach to monetary policy, with no urgency for further rate hikes.

Federal Reserve Governor Christopher Waller stated Wednesday that recently available economic data suggests the U.S. economy has not shifted dramatically since the central bank's last policy meeting, with inflation failing to present a significant challenge against a backdrop of a softening labor market.

Waller's remarks, delivered at a financial conference, underscore a Fed in monitoring mode. The latest figures show the annual inflation rate rose to 3% in September, the highest reading since January but still coming in below market forecasts. Core inflation, which strips out volatile food and energy prices, also registered at 3%.

"The data we have in hand since the last meeting doesn't scream for a policy response," Waller said, according to people familiar with his comments. "The inflation picture is not causing alarm, particularly given the signals we're getting from the employment sector."

The labor market, a key focus for the Fed, is described as "weak" in the current assessment, a condition that is helping to temper wage-driven price increases and lessen the risk of an inflation spiral. This dynamic gives policymakers more latitude to pause further interest rate hikes as they balance their dual mandate of price stability and maximum employment.

Month-over-month inflation remains modest, with price increases largely concentrated in segments like food and certain energy categories. This has provided some relief for consumers and businesses facing moderately rising costs, though workers continue to feel pressure from a cooler job market.

Efforts to reach a Fed spokesperson for additional comment on the timing of future policy moves were unsuccessful.

Analysts project inflation will gradually decline in the coming years, reaching around 2.6% in 2026. The current conditions represent a cooling phase for an economy that the Fed spent the prior two years battling with sharp interest rate increases to combat post-pandemic inflation spikes.

Correction: An earlier version of this article misstated the core inflation figure. Core inflation stands at 3%.