Fed's Waller Flags Broad Inflation, Traders Price Two 2026 Hikes

Federal Reserve official Christopher Waller is sounding the alarm on how widely prices are climbing, according to a report from Financial Juice. His concern lands as U.S. inflation runs at 3.7% year over year as of September, well above the Fed's 2% target. Waller's read of the data suggests price pressure may be digging in across multiple sectors rather than cooling off in a few pockets.

Prediction markets took the hint. Traders have nudged up the odds of at least one rate hike in 2026, and now price an 80% probability of two hikes that year. The Fed's benchmark rate currently sits between 3.75% and 4%, leaving room to move if officials decide inflation needs a harder pushback.

That combination, sticky prices plus a Fed still far from its 2% goal, points toward the possibility of a more restrictive stance. Waller's emphasis on just how broad the increases are is the part markets are chewing on, since it argues against treating the problem as a handful of outliers.

What comes next runs through the Fed's own language. Any shift in tone or wording in upcoming FOMC statements will be read as a signal, alongside fresh data on inflation, payroll growth and wages. Speeches and announcements from officials, Jerome Powell above all, will carry extra weight as the central bank weighs its response.

The benchmark rate and the prediction-market odds are the two numbers to watch from here: 3.75% to 4% on one side, an 80% chance of a double hike in 2026 on the other.