Waller’s Feb 2026 Fed View: PCE, GDP, Yields, March Call

Waller’s Feb 23, 2026 Message: Solid Growth, Fragile Labor

Federal Reserve Governor Christopher Waller said on February 23, 2026 that the U.S. economy is growing solidly overall. However, he also described the labor market as fragile.

That caution follows an exceptionally weak 2025. Waller noted that net job creation was near zero or negative outside recessions. Therefore, labor data remains central to the Fed’s next move.

Why January Jobs Didn’t “Settle It”

A surprisingly strong January 2026 jobs report created hope for a turnaround. Still, Waller warned it may be noise rather than signal.

He cited sectoral concentration, conflicting private indicators, and the history of revisions. As a result, he is watching upcoming data closely.

What Last Week’s Data Added to the Story

Last week’s releases delivered a mixed picture.

Consumer Activity Softened

January retail sales were flat (0.0%). That missed the 0.4% forecast. It followed variable consumer spending patterns seen in late 2025. Consequently, consumer momentum looks uneven.

Manufacturing and Claims Stayed Constructive

The Philadelphia Fed Manufacturing Index rose to 16.3, the highest since September 2025. In addition, initial jobless claims remained low at 212,000. Those points suggest continued stability in labor conditions.

Inflation and Growth Sent Mixed Signals

The Fed’s preferred inflation gauge, Core PCE, rose 3.0% year-over-year. Also, supercore services increased 0.6% month-over-month, driven by medical services and transportation.

At the same time, Q4 2025 GDP was revised down to 1.4% annualized from 2.8%. Therefore, growth looked weaker than initially reported.

Bond Market Impact and the March Fed Outlook

Markets repriced rate expectations. Treasury yields rose as PCE data offset what often follows weaker GDP.

• 2-Year: 3.48%

• 10-Year: 4.08%

• 30-Year: 4.72%

After the PCE release, CME FedWatch showed a 95.9% probability of the Fed holding rates steady in March. According to Kalshi, 95% of the bets are on the Fed maintains current rates. Meanwhile, the yield curve still reflects an inflation premium in short-term rates, while long-term rates react to slower growth and potential fiscal shifts.

For King, Pierce, and Snohomish Counties, this rate backdrop is a key variable for affordability and demand.