Waller’s Rate-Hike Menu: 25 bps or 50 bps, With Inflation Calling the Order

Federal Reserve Governor Chris Waller said he would support a 25-basis-point rate increase at the December FOMC meeting even if the October CPI inflation data shows improvement. He also raised the possibility of backing a 50-basis-point hike if inflation exceeds his expectations.

Speaking in London, Waller said, “However, if inflation comes in substantially higher than I expect, more robust action by the FOMC may be called for.” He characterized the labor market as stable while noting that inflation remains well above the Fed’s 2% goal, arguing that the FOMC needs to raise rates to curb rising inflation.

Waller said a 50 bps increase could be warranted if the October core CPI reading matches the 0.3% recorded in each of the previous two monthly readings or comes in higher. He also said hiking only 25 basis points could put the Federal Reserve’s credibility at risk.

Polymarket data showed an almost 90% chance that the Fed will hike rates, placing additional focus on the December FOMC meeting and the inflation figures that precede it.