Waller says Fed shouldn't 'fight the last war' on inflation but warns hikes still possible

Federal Reserve Governor Christopher Waller on Monday expressed concern about inflation but cautioned against "fighting the last war," saying the central bank should wait for more data before raising interest rates.

In remarks delivered for a speech in New York, Waller said inflation has expanded beyond the often-cited drivers such as the energy price spike in tariffs. Rather, he cited other factors, particularly artificial intelligence, as root causes for why price increases have held stubbornly above the Fed's 2% target.

Waller warned that "the desire to avoid past mistakes is often the author of new ones."

"I am cognizant of the mistake we made in 2021 by not responding sooner to the high inflation we observed, and I am determined to avoid repeating it," he said.

However, he said that doesn't reflexively mean raising interest rates to head off the current spate of price increases.

Waller said there is still "a credible case for inflation to begin to fall back" but noted there is an "equally plausible" scenario where inflation could stay elevated or increase, "requiring tighter monetary policy in the near term."

The policymaker emphasized a deliberate approach as policymakers evaluate the root causes of inflation, which he listed as tariffs implemented in 2025, the rising energy prices associated with fighting in the Middle East – and "spillovers from demand" from artificial intelligence.