Fed, ECB and SNB Officials Signal More Rate Hikes Needed as Inflation Stays Elevated

Federal Reserve Governor Christopher Waller signaled multiple additional interest rate increases are coming, while leaving flexibility on timing. Waller said inflation remains too high, now running more than five and a half years above target, with persistent inflationary forces including the AI buildout and an ongoing energy shock. He expects the economy to strengthen in the second half of 2026, indicated further hikes do not need to come at consecutive meetings, and said he anticipates additional increases if data come in as expected.

On the European side, ECB Governing Council member Bostjan Dolenc struck a hawkish tone, stating that persistently elevated inflation supports moving policy rates toward more restrictive territory. Dolenc identified upside inflation risks from oil, gas, food prices and strong economic growth, while offering a partial reassurance that relatively stable core inflation suggests broader price pressures remain contained. He also argued that ECB rates can prevent the current price shock from spreading, and noted that monetary policy is being transmitted homogeneously into broader financial conditions.

Other ECB officials were more measured. Governing Council members Francois-Louis Moulin and Steven Sleijpen, speaking on a panel about the strategic outlook in the global economy, both said they do not expect second-round inflation effects, with Moulin describing the euro area inflation shock as 100 percent energy-driven and noting that growth has been quite resilient. Sleijpen added that inflation expectations remain well anchored. ECB's Pierre Wunsch separately pushed back on proposals to raise the minimum reserve requirement, calling the reasoning not very clear or convincing.

Switzerland's central bank took a more relaxed stance. SNB Vice Chairman Martin said Switzerland has inflation lower and more stable than other countries, that no second-round effects are being observed, which he called extremely reassuring, and that there is no necessity at this stage to change monetary policy. He did note a slight rise in inflationary pressure since June, attributing the recent uptick in Swiss inflation to oil products, and said the SNB will remain attentive to any emerging second-round effects.