Waller backs a December rate increase and leaves a half-point move open
The Fed governor's remarks came before Tuesday's CPI release. He said core inflation around 0.3% or higher would warrant considering a larger increase.
Federal Reserve Governor Christopher Waller said Tuesday he was leaning toward a quarter-percentage-point interest-rate increase in December, even if October inflation improved. He also said a half-point increase should be considered if price pressures remained strong.
His speech in London was delivered before the release of October consumer-price data. It was a statement of his own policy views, not a decision by the Federal Open Market Committee or a response to numbers that had already been published.
The condition for a larger increase
Waller said that if October core CPI were around 0.3% for the month or higher, similar to the preceding two readings, a stronger move might be needed. In that case, he said, a 50-basis-point increase should be considered at the December meeting. A basis point is one-hundredth of a percentage point.
The subsequent October CPI release showed a 0.3% monthly rise in prices excluding food and energy and a 0.4% headline increase. Those readings put the report within the range he had described, but do not establish what he or the wider committee will ultimately support.
October's pause did not mean tightening was over
Waller said he had backed holding rates steady at the October meeting because earlier Fed communications had already led markets to price in further tightening. In his view, the important point was that expected increases were eventually delivered, rather than that rates rose at every meeting.
The distinction matters for the next decision: his comments support further tightening and keep the size open. They are not a promise that the committee will choose either a quarter-point or a half-point increase.
