Federal Reserve Gov. Christopher J. Waller said he favors a December rate increase even if October inflation eases, while keeping a larger move under consideration if underlying price growth stays firm.
The Fed’s policy-setting Federal Open Market Committee (FOMC) kept its federal funds target range at 3.75% to 4.00% on Oct. 28. The 10-2 decision drew two dissents, both favoring a quarter-point increase. Waller’s remarks describe his own view, not a decision by the committee.
In prepared remarks delivered in London on Nov. 10, Waller said a quarter-point increase would still be appropriate if inflation improved. If October’s CPI resembles the previous two monthly readings, with core inflation around 0.3% or higher, he said a half-point increase should be considered. “Hiking only 25 basis points would put our credibility at risk,” he said.
Waller said the October hold was possible because earlier Fed communications had already led markets to price in some tightening. In his view, failing to deliver the increases signaled by the Fed within a reasonable time could lower rate expectations and loosen financial conditions. He previously defended the October decision in comments on the Fed’s rate pause.
The Bureau of Economic Analysis (BEA) reported that its personal consumption expenditures (PCE) price index, excluding food and energy, rose 0.3% in September from August and 3.1% over 12 months. Waller said more than 70% of core PCE services price components recorded annual increases above 3% in September.
Waller also cited Fed staff research pointing to possible further producer-price pressure and more persistent effects from energy costs. The Bureau of Labor Statistics (BLS) scheduled the October CPI release for Nov. 10 at 8:30 a.m. EST (13:30 UTC). The FOMC’s next meeting is scheduled for Dec. 8-9.
