Waller backs December rate increase of 25 or 50 basis points
Federal Reserve Governor Christopher J. Waller favors a 25 basis point increase in December but would consider 50 if inflation remains firm. September PCE inflation reached 3.7 percent, while he sees employment close to the maximum-employment goal.
December tightening remains on course
Waller supported October's Federal Open Market Committee (FOMC) rate hold because credible guidance had already tightened financial conditions.
He said promised increases must follow or falling market rates would undo that restraint.
He favors 25 basis points in December even if October inflation improves; core CPI inflation around 0.3 percent or higher would warrant considering 50 basis points.
September PCE inflation was 0.5 percent monthly and 3.7 percent annually; core readings were 0.3 and 3.1 percent.
More than 70 percent of core PCE service components rose above 3 percent annually.
He flagged AI equipment prices and energy costs as risks to the 2 percent goal.
Shipping safeguards reportedly add $20-$30 per barrel to oil prices; diesel refining constraints also sustain costs.
Stable employment masks weaker mobility
Real GDP grew 3.4 percent in Q3, supported by consumption and AI investment.
October unemployment was 4.1 percent; payrolls rose 165,000, with 85,000 added to prior 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 separations each.
Waller linked low turnover to aging, education, uncertainty and pandemic job matching.
Long-term unemployment rose from around 18 percent of unemployment at end-2022 to above 27 percent through September 2026.
Price risks take precedence
Waller treats inflation, not employment, as the immediate policy constraint.
He cites research indicating that energy pressures may persist into 2027, particularly if oil stays elevated.
His longer-term concern is that weak worker mobility may impair productivity, but he leaves that question unresolved.