Federal Reserve Governor Christopher Waller has said the central bank should raise interest rates at its December meeting even if October inflation data, due later today, show prices cooling — and that a larger half-point increase should be considered if underlying price pressures worsen.
“While I am hoping for an improvement over September, even if this occurs, I would still support a 25 basis point increase in the FOMC’s policy rate at our December meeting,” Waller said in remarks prepared for delivery in London on Tuesday.
The October consumer price index is due at 8:30 a.m. Eastern time (13:30 GMT). Economists polled by Reuters expect core prices, which strip out volatile food and energy costs, to have risen a moderate 0.2% from September. Waller said that if core prices instead rise by 0.3% or more, “a stronger policy move may be needed” and a 50 basis point increase “should be considered”.
Anything less than a December rise, he argued, risks damaging the Fed’s inflation-fighting credibility, given inflation that is too high and appears to be broadening out. More than 70% of the components of core services inflation rose by 3% or more in September, he said, and he warned he would be watching whether high-tech goods prices linked to the artificial intelligence buildout keep rising at their recent rapid pace.
Inflation remains well above the Fed’s 2% target. The personal consumption expenditures index rose 3.7% in the year to September, while core PCE inflation — the measure policymakers use to judge the underlying trend — rose 3.1%. Recent Fed staff analysis suggests producer prices could keep climbing and that energy shocks may now push prices up more persistently than they did before the pandemic, with the pressure lasting well into 2027 if oil prices stay elevated.
Waller backed the central bank’s decision last month to leave rates unchanged at 3.75% to 4.00%, saying policymakers had all but promised further tightening. But he warned that failing to deliver the promised rises would itself loosen policy, as markets would cut their expectations for future hikes and borrowing costs would fall. “While the precise timing of the hikes doesn’t matter, ensuring that the promised hikes are implemented in a reasonable period of time does,” he said.
His unusually blunt guidance contrasts with Fed Chair Kevin Warsh, who has resisted giving any steer on the future path of rates. Financial markets are already braced for a December move: futures pricing on Monday put the chance of a hike at the Fed’s December 8–9 meeting at about 85%, to a new target range of 4.00% to 4.25%, with a better-than-even chance of another rise as soon as March.
On the wider economy, Waller said growth was likely to ease from last quarter’s 3.4% annualised pace as consumer spending slows to levels more consistent with household income and wealth, but that output would “continue to grow at a solid pace”. He described the labour market as “solid”, with worker demand and supply in rough balance, despite an unemployment rate of 4.1% that he said may flatter the picture. “Inflation, by contrast, is too high and the focus of my attention,” he said.
Sources: Reuters — “Fed’s Waller plans to support at least a quarter-point rate hike in December” (https://www.reuters.com/business/feds-waller-plans-support-least-quarter-point-rate-hike-december-2026-11-10/)
