Solid Gold Berjangka – Federal Reserve Governor Christopher Waller has expressed support for an interest rate hike at the December meeting, leaving open the possibility of a 50-basis-point increase should U.S. inflation show signs of persistent, high pressure. According to Waller, the U.S. economy remains robust and the labor market stable, yet inflation continues to hover at an excessively high level.
Waller indicated that he would lean toward a 25-basis-point hike if the October Consumer Price Index (CPI) data shows improvement. However, should core inflation remain around 0.3% on a monthly basis—or higher—he believes a 50-basis-point increase should be considered to preserve the Fed’s credibility in controlling inflation.
This statement stands as one of the most hawkish signals from a Fed official ahead of the December meeting. Waller argues that a hike of only 25 basis points, in an environment where inflation remains elevated, might be insufficient to convince the market that the central bank is serious about curbing price pressures.
In its most recent decision, the Fed opted to hold interest rates steady—by a 10-2 vote—following a 25-basis-point increase in September that brought the range to 3.75%–4%. With October labor market data revealing strong job growth and a declining unemployment rate, the market now assigns an approximately 85% probability to an interest rate hike in December.
Market attention is currently focused on the U.S. CPI, as the outcome could dictate the aggressiveness of the Fed’s actions in December. A persistently high CPI would likely strengthen expectations for a 50-basis-point hike and bolster the dollar, whereas a cooling in inflation could make a 25-basis-point increase more consistent with Waller’s perspective. (arl)