Fed governor Waller supports a December rate increase
US Federal Reserve governor Christopher Waller favors a December rate increase and would consider a larger move if price pressures persist. He described economic growth as strong and inflation as too high. His remarks also addressed a labor market with low hiring and departures, where young jobseekers and people facing prolonged unemployment encounter difficulties.
Economics & Markets··Evening
December increase remains Waller’s preference
US Federal Reserve governor Christopher Waller supported a December interest-rate increase in a 10 November speech in London. He said inflation remains too high despite strong economic activity and a broadly stable labor market. If inflation keeps accelerating, he would consider a larger increase. The remarks set out Waller’s position ahead of the December policy decision.[1], [2]
He leans toward a 25-basis-point increase even if inflation improves. If October core consumer prices rise around 0.3 per cent or more, he argued, a 50-basis-point move should be considered. Waller said his October vote to keep rates unchanged reflected tightening already embedded in financial markets following the committee’s communications.[1]
Growth and price figures support the tightening argument
Waller cited an initial estimate showing US real gross domestic product grew 3.4 per cent in the third quarter. Consumption and investment supported activity, including high-technology equipment tied to the artificial-intelligence buildout. He warned that failing to deliver expected rate increases within a reasonable period could bring down market rates with an undesirable easing of policy to follow.[1]
September’s personal consumption expenditures price index increased 0.5 per cent monthly and 3.7 per cent annually. The core measure, excluding food and energy, rose 0.3 per cent over the month and 3.1 per cent over the year. Waller expressed concern about persistent price pressures in energy and technology goods. His speech came before October consumer price data were released.[1]
Low hiring complicates the stable labor picture
October unemployment declined to 4.1 per cent, while payrolls increased by 165,000. Revisions added a combined 85,000 jobs to the preceding two months. Waller put average monthly gains over both six and twelve months at around 80,000. He questioned whether stability necessarily signals a healthy market when hiring and departures are both low.[1]
He highlighted difficulties for young entrants and people experiencing prolonged unemployment. An older, more educated workforce, economic uncertainty, artificial intelligence and lasting effects from pandemic-era job switching were among his possible explanations for reduced dynamism. Waller acknowledged uncertainty over the explanations and said his views need not represent other Board or committee members.[1]
