Fed's Waller opens door to larger December rate hike
Federal Reserve Governor Waller said a half-percentage-point rate hike in December could be warranted if inflation readings come in higher than expected.
Federal Reserve Governor Christopher Waller said Tuesday the central bank is likely to raise interest rates in December. Waller suggested a half-percentage-point increase could be justified if inflation stays elevated.
Speaking in London, Waller said keeping promises about rate hikes matters more than timing. If markets lose faith the Fed will act, interest rates would fall and loosen policy at the wrong moment.
October's inflation data showed a headline increase of 0.4 per cent and core inflation of 0.3 per cent. Both were 0.1 percentage point higher than expected.
Markets priced in roughly a quarter-point hike for December, with about 12.5 per cent odds on a half-point move. Dallas Fed President Lorie Logan said two more quarter-point hikes could come before the bank pauses to assess impact.
- 0.4 per cent, 0.1 pp above forecast
- October headline inflation
- 0.3 per cent, 0.1 pp above forecast
- October core inflation
- 12.5 per cent
- Market odds on half-point move
Why it mattersFed rate hike credibility affects how markets price in future monetary policy moves.
AustraliaHigher US interest rates typically strengthen the US dollar against the Australian dollar, making imports more expensive and affecting Australian exporters and consumers. Australian interest rates may face upward pressure if the Fed moves more aggressively.
