Waller Puts 50-Basis-Point Hike on the Table for December After Core Inflation Hits 0.3%

Key Facts

Federal Reserve Governor Christopher Waller said a 50-basis-point rate hike should be under consideration at the December meeting if core inflation in October came in around 0.3% or higher. The Bureau of Labor Statistics data met that threshold, with the core Consumer Price Index rising 0.3% during the month. But Waller said he would support a 25-basis-point hike if the data improved as he expects. He warned that settling for a 25-basis-point increase if core inflation remained elevated "would put our credibility at risk." The Fed left interest rates unchanged in October, after raising its target range in September to 3.75%–4%.

The headline Consumer Price Index rose 0.4% in October, slowing from 0.6% in September, according to the Bureau of Labor Statistics. The core index, which excludes food and energy, posted a monthly gain of 0.3% for a third consecutive month, following the same rate in August and September. Economists surveyed by Reuters had forecast a 0.3% increase in headline inflation and 0.2% in core inflation, leaving both actual readings above expectations. Waller’s condition therefore applied to core inflation, not the headline reading. At the same time, he said economic activity was strong and the labor market stable, while inflation remained "well above" the Fed’s 2% target.

Price pressures extended to the Fed’s preferred gauge: the personal consumption expenditures price index rose 0.5% in September and 3.7% over the previous 12 months. The core gauge, which excludes food and energy, rose 0.3% monthly and 3.1% annually through September, according to Waller. The official described the breadth of price increases as a concern, while seeing demand and activity as still robust. The initial estimate of real gross domestic product growth was 3.4% in the third quarter, supported by strong consumer spending and solid investment. Unemployment also fell to 4.1% in October, while Waller expected growth to slow slightly in the current quarter as consumer spending eased, with output continuing to expand at a solid pace.

The bond market reacted to the inflation data and repriced rate expectations, after Waller’s remarks had been delivered before the figures were released. The U.S. two-year Treasury yield climbed 18.44 basis points to 4.731% on November 10, its biggest daily jump since the April 2025 tariff turmoil. The 10-year Treasury yield rose 12.55 basis points to 4.988%. Market pricing showed a roughly 15% chance of a half-percentage-point increase by midmorning, before falling to about 10% late in the afternoon. Traders also increased bets on three quarter-point hikes by mid-2027, compared with two expected before the inflation data.

The Bureau of Labor Statistics calendar shows the October Producer Price Index is due on November 13 at 8:30 a.m. Eastern time. Fed Vice Chair for Supervision Michelle Bowman was also scheduled to speak on November 12, and Vice Chair Philip Jefferson to deliver a speech on November 13. Those events will precede the Federal Open Market Committee meeting scheduled for December 8 and 9, at which Waller said a 50-basis-point hike should be on the table if core inflation confirms persistent pressures. His stated position, by contrast, remains to support a 25-basis-point hike if the next data are consistent with his expectations for improving inflation. The Bureau of Labor Statistics said it did not collect survey data for October 2025 because of the government funding lapse, preventing publication of the annual change in the October 2026 index for affected series.