Fed Governor Waller Backs December Rate Hike and Puts 50 Basis Points on the Table

Federal Reserve Governor Christopher Waller said on Tuesday that he plans to support an increase in interest rates at the Federal Reserve’s December meeting — and that a half-point rise should be on the table if inflation stays stubborn. Within hours, the October inflation figures landed exactly on the line he had drawn.

A quarter point, at least

Waller set out his position in London, in a speech to the Bank of England Watchers’ Conference titled “The Economic Outlook and Some Thoughts on Labor Market Dynamism”. His base case is a quarter-point increase at the Federal Open Market Committee’s meeting on 8–9 December — even if October’s inflation data came in softer than expected.

“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, according to Reuters.

The Fed raised its benchmark rate by a quarter point in September, taking the target range to 3.75%–4%, and then held it steady in October. Markets had already priced in a December move: futures pointed to an 85% chance of a quarter-point rise to 4.00%–4.25% at Monday’s close.

Waller’s speech also ranged over the labour market, where US job openings jumped to 7.52 million in September, a sign that demand for workers has held up even as the Fed weighs higher borrowing costs.

The 0.3% trigger

But Waller went further, setting a clear test for a bigger step. If October’s core consumer prices — which strip out food and energy — rose by 0.3% or more from September, he said, “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,” he added, warning that inflation was too high and appeared to be broadening.

The data, released by the Bureau of Labor Statistics at 8:30 a.m. ET on Tuesday, met his test precisely. October consumer prices rose 0.4% from September, above the 0.3% forecast, while core prices rose 0.3% — above the 0.2% forecast and the third month in a row at that pace. Shelter costs rose 0.3% and accounted for more than 30% of the monthly increase, while energy price gains slowed to 0.7% from 5.2%.

The Bureau published no annual inflation rate for October, because it never collected October 2025 prices during last year’s lapse in appropriations. September’s 3.7% remains the last official 12-month reading.

Markets reprice the odds

Traders moved fast. The probability of a half-point December hike jumped to nearly 15% after the data, from zero the day before, according to CME FedWatch data cited by the Motley Fool, while the chance of a quarter-point move stayed near 85%. Nasdaq futures and gold tumbled intraday as the hawkish signal sank in.

The mood has been jumpy all week: the Dow jumped 540 points on Monday as oil slid 5%.

Waller was not the only official sounding hawkish. Dallas Fed President Lorie Logan said separately that it “may be possible to move more rapidly” than the pace implied by September’s hike and October’s hold.

Not everyone agrees a bigger move is wise. A Morgan Stanley strategist said a 50-basis-point hike would be “too far”, and Waller himself is only one of 12 voting members of the rate-setting committee — his view alone does not decide the outcome. His willingness to give detailed guidance also contrasts with Fed Chair Kevin Warsh, who has resisted offering any steer on the rate path.

What it means for borrowers

A December increase would push borrowing costs higher still, at a moment when households and businesses are already paying more for credit. The Fed’s next data points arrive before the meeting: the October personal consumption expenditures index on 25 November, and November’s consumer prices on 10 December — one day after the December meeting ends.

For now, Waller has made the choice unusually clear: a quarter point is his floor, and if the inflation data keep coming in hot, a half point is firmly in play.

Will the Fed raise interest rates in December?

Markets see a December rise as near certain, pricing in an 85% chance of a quarter-point increase and a growing chance of a half-point move after the October inflation data.

What would trigger a 50-basis-point hike?

Waller said a half-point rise should be considered if October core CPI rose 0.3% or more. It rose exactly 0.3% — the third month in a row at that pace.

When does the Fed meet next?

The Federal Open Market Committee meets on 8–9 December. November’s inflation data arrive on 10 December, one day after the meeting ends.