Waller favors December rate increase of 25 or 50 basis points
Federal Reserve Governor Christopher J. Waller favors a 25 basis point rate increase in December 2026. He would consider 50 basis points if October monthly core CPI inflation is around 0.3 percent or higher.
Inflation tests policy credibility
Waller supported the October Federal Open Market Committee (FOMC) majority's rate hold because guidance had already tightened financial conditions, but said promised increases must follow.
September PCE inflation reached 0.5 percent monthly and 3.7 percent annually; core readings were 0.3 and 3.1 percent, respectively.
Over 70 percent of core PCE services components rose more than 3 percent annually, against a 2 percent inflation target.
He cited AI-related equipment costs and energy pressures.
Fed research indicated energy pass-through might persist into 2027; shipping insurance and oil transfers reportedly added $20–$30 per barrel.
He warned that raising rates only 25 basis points after another elevated core CPI reading would risk credibility.
Stable employment masks weak mobility
Third-quarter real GDP grew 3.4 percent, supported by consumption and investment.
October unemployment was 4.1 percent; payrolls rose 165,000, with 85,000 added to the prior two months.
Six- and 12-month payroll gains averaged about 80,000 monthly.
September's 60,000 net jobs masked more than 5 million hires and more than 5 million departures.
Waller questioned whether low hiring and separations impair productivity.
The three-month average share unemployed for at least 27 weeks rose from about 18 percent at end-2022 to over 27 percent through September 2026.
Stability is not health
Waller separates near-term inflation risks from unresolved questions about labor mobility.
Better job matches would support productivity, while barriers to mobility would hinder it, he said.
His December preference remains conditional on inflation data, not a commitment by the FOMC.