Federal Reserve Board Governor Christopher J. Waller signaled support for a 25 basis point interest rate increase at the Federal Open Market Committee’s (FOMC) December meeting, citing excessive inflation alongside strong economic activity and stable employment. Speaking at the Bank of England Watchers Conference in London, he argued that a 50 basis point increase should be considered if October’s monthly core consumer price inflation comes in at around 0.3% or higher. He defended his support for October’s rate hold because markets had already priced in tightening, but stressed that anticipated increases must be delivered within a reasonable period.
September’s personal consumption expenditures inflation reached 3.7% over 12 months, while the core measure excluding food and energy stood at 3.1%. Price pressures had broadened beyond components Waller regarded as difficult to measure, with more than 70% of core service price components recording annual increases above 3%. Federal Reserve research pointed to further potential price increases associated with the artificial intelligence investment buildout. Separate research suggested energy shocks could have larger and more persistent effects on core inflation than previously, potentially extending well into 2027 if oil prices remain elevated.
Waller viewed employment as close to the FOMC’s maximum-employment goal, with unemployment at 4.1% in October, but questioned whether unusually low hiring and separations conceal longer-term weaknesses. Low hiring can prolong unemployment and make entry into work harder for young people, even when layoffs remain limited. He distinguished between lower turnover reflecting better matches between workers and jobs, which could support productivity, and barriers to mobility that could impede productivity growth. The causes and monetary policy implications remain uncertain, warranting further research rather than an immediate policy conclusion.