Fed Governor Christopher Waller Says Tuesday in London He Is Leaning Toward a Quarter-Point Rate Hike at the December FOMC Meeting — and Would Back a Half-Point Rise if Inflation Moves Up — Saying the Fed Promised a Series of Hikes and Must Deliver
Federal Reserve Governor Christopher Waller said Tuesday he would support raising interest rates by a quarter point at the Fed's December meeting — and would back a half-point rise if inflation has moved up — arguing the central bank promised the public a series of rate increases and must deliver on that promise.
Waller made the remarks in a speech on the economic outlook at King's College London. "Given concerns about inflation, I would support raising the target range by 25 basis points at the December FOMC meeting," he said. "If it turns out that inflation has not moved down or, even worse, has moved up further, I would support a 50-basis-point increase at the December FOMC meeting."
"I believe the Committee promised the public a series of rate increases, and it is our responsibility to deliver on that promise. The private sector and financial markets have already committed to making plans based on this promise," Waller said, adding that while the precise timing of the hikes does not matter, making sure the promised hikes are implemented in a reasonable period does. Higher rates, he said, "will be needed, sooner rather than later."
Waller described the economy as growing "at a healthy pace" with a labour market that "has also been solid" in the current low-hire, low-fire climate. He said he expects the federal funds rate — now at 3.50% to 3.75% — to peak between 4% and 4.25%. Traders are already pricing in an 88% probability of a quarter-point hike at the December 9-10 meeting, according to CME Group's FedWatch.
The stance is a turn for Waller, who had been one of the Fed's more dovish policymakers and pushed for rate cuts earlier in the year. At the October 28-29 meeting the Fed held rates steady for a third straight time, with Waller and Governor Stephen Miran dissenting in favour of a quarter-point reduction, and Chair Jerome Powell said afterwards that a December move was not a foregone conclusion. The inflation figures behind Waller's case: September consumer prices rose 3.0% year over year and core prices 3.1% — both further from the Fed's 2% target — while October unemployment stood at 4.4%, up from 4.0% in January.
For American households, a December hike means borrowing stays expensive: mortgage rates, car loans and credit-card rates track the Fed's benchmark, so the relief many families are waiting for on monthly payments would be pushed further out — the price Waller argues must be paid to stop inflation, stuck around 3% for more than a year, from settling in for good.
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