Will the Fed Raise Rates in December?

The decision has not been made yet — but on the evidence as of Tuesday, November 10, a quarter-point rate hike in December is the likely outcome. The Federal Open Market Committee meets on December 8–9 and votes then. Fed Governor Christopher Waller said in London on Tuesday that he would support a 25 basis point increase at that meeting even if October inflation improves as he hopes, and Reuters reported that futures markets on Monday's close were pricing in about an 85% chance of a hike to a new target range of 4.00%–4.25%.

The plain reality behind the question is that inflation is still well above where the Fed says it must be. The Fed targets 2% inflation on the personal consumption expenditures index; September's reading was 3.7%, and core PCE inflation, the measure policymakers use for the underlying trend, rose 3.1% from a year earlier. Waller said more than 70% of the components of core PCE services inflation rose 3% or more in September — the increases are broad, not one or two items.

Waller's claim is that the Fed promised this. He backed holding rates steady at the October 27–28 meeting, where the committee kept the target range at 3.75%–4.00% after September's quarter-point hike, in part because policymakers had all but promised further tightening. His London speech, "The Economic Outlook and Some Thoughts on Labor Market Dynamism," set against Fed Chair Kevin Warsh's refusal to give any rate-path guidance, was the clearest statement yet from inside the committee: "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."

September's inflation data were bad. There was no silver lining.

The common-sense principle, in Waller's own logic, is that a promised hike that never arrives is itself a policy change: if the hikes are not carried out, markets cut their expectations, rates fall on their own, and policy loosens in a way the Fed does not want. A central bank that says it will tighten and then does not has spent credibility it will need later.

The consequence is that December's choice is now framed as a quarter point or a half point — not hike or no hike. Waller set the test himself: if October core consumer prices, due at 8:30 a.m. EST on Tuesday, rise 0.3% or more from September, like the last two readings, "a 50 basis point hike in the policy rate should be considered at the December meeting," because hiking only 25 would put the Fed's credibility at risk. Economists polled by Reuters expect a milder 0.2% core reading, which on Waller's own terms points to the quarter point. So the question that follows is whether the rest of the committee follows Waller's line when it votes on December 9, with its decision announced at 2:00 p.m. ET alongside new economic projections.

The details that matter are the fixed points around the vote. The December 8–9 meeting is the last of 2026 and a projections meeting, so the decision lands with a fresh dot plot. Waller described the labour market as solid, with worker demand and supply in rough balance and unemployment at 4.1%, and GDP grew at a 3.4% annualised rate last quarter — in his account there is no jobs emergency forcing the Fed's hand either way, which leaves inflation as the deciding fact. Our coverage of Waller's London remarks carries his full position as he stated it on Tuesday.

Waller closed his case on the point he returned to all speech: hiking too little, in his words, would put the Fed's credibility at risk — "a risk I am not eager to take."