Waller says a 50 basis-point December hike should be considered if core CPI stays at 0.3%

Federal Reserve Governor Christopher Waller said on 10 November that he is leaning toward supporting a 25 basis-point increase in the policy rate at the Federal Open Market Committee's December meeting, and that a 50 basis-point hike "should be considered" if October's core consumer price index came in around 0.3% or higher.

The remarks were delivered in London at the Bank of England Watchers Conference, a few hours before the Bureau of Labor Statistics released the October CPI. The prepared text is on the Fed's website. Waller said the views were his own, not necessarily those of his colleagues on the Board or the FOMC.

"To recap my economic outlook, economic activity is strong, the labor market is stable, but inflation is too high, well above the FOMC's 2 percent goal," he said. "This means that even if, as I expect, the monthly rate of inflation improves in October, I am leaning toward supporting an increase in our policy rate of 25 basis points at our December meeting."

He then set a higher bar. "If the October CPI inflation data out later today are similar to the past two monthly readings, with core CPI inflation around 0.3 percent or even higher, then a stronger policy move may be needed. In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting. Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take."

Waller said he had supported holding the policy rate at the most recent FOMC meeting because earlier communication had already led markets to price in tightening, and what mattered was that promised increases be carried out in a reasonable time. He described third-quarter real GDP growth, on the initial estimate, as 3.4%, helped by consumer spending and investment, including high-tech equipment tied to the AI buildout. He put October payroll gains at 165,000 jobs, with 85,000 jobs added to the prior two months, and the unemployment rate at 4.1%.

On inflation, he called September's data "bad" and "no silver lining," citing monthly PCE inflation of 0.5% and 3.7% over 12 months, and core PCE of 0.3% and 3.1% over 12 months. He said more than 70% of the components of core PCE service prices had 12-month increases above 3% in September, and he pointed to staff research on AI-related price pressures and on energy shocks feeding through to core inflation for longer than in the past.

Those comments were a policy outlook from one governor, delivered before that afternoon's CPI release. They are not a committee decision and are not advice about any investment.