Waller Leans Toward a Fed Rate Hike in December as Inflation Holds Firm

what happened

The US Consumer Price Index (CPI-U) rose 0.4 percent on a seasonally adjusted basis in October, after a 0.6 percent gain in September, the Bureau of Labor Statistics reported. The index excluding food and energy rose 0.3 percent, the same pace as in September and August.

Fed Governor Christopher Waller, speaking in London, said he is leaning toward supporting a 25 basis point increase at the December FOMC meeting. He added that if core inflation comes in around 0.3 percent or higher, a stronger move may be needed, and in that case a 50 basis point hike should be considered. Goldman Sachs Asset Management, in its November Market Pulse, also expects a December increase.

According to TradingView, lenders in Europe and Latin America reported third-quarter results the same week, including HSBC, Santander, ING, Credicorp and Itaú Unibanco.

why it matters

The key signal for markets is that the Fed could tighten again as early as December. That supports Treasury yields and the dollar, while growth stocks and gold often come under pressure when rate expectations rise.

market impact

Dollar and US Treasuries: expectations of a Fed hike support yields and the dollar

• ▲US dollar pressure up — expectations of tighter Fed policy lift yields on dollar-denominated assets
• ▼US Treasuries pressure down — higher expected rate hikes push down prices of longer-dated bonds
• ▼Gold pressure down — higher real yields reduce the appeal of non-yielding gold

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