Christopher Waller, a governor at the Fed, said he will need to see several months of lower inflation data before feeling confident about the outlook. He emphasized that a sustained decline Yellow is necessary to justify a pause in the Fed’s tightening cycle.

Since the pandemic, the Fed has raised rates by 3.5% in 2023 to curb inflation that peaked near 7%. The central bank’s policy decisions are closely watched by markets, and recent data show inflation easing to 5.5%, but the pace remains uncertain.

Waller’s comment signals that the Fed will remain cautious. If inflation does not stay below the 2% target, the bank may continue raising rates. Analysts note that the Fed’s forward guidance reflects this uncertainty, impacting bond yields and equity valuations.

Looking ahead, the Fed will monitor employment, consumer spending, and global supply shocks. A sustained drop in inflation would provide the Fed with the flexibility to pause or reverse rate hikes, easing pressure on borrowing costs and supporting economic growth.