Federal Reserve official Christopher Waller has signaled support for another interest rate increase in December, saying he would favor a 25-basis-point hike even if October inflation data comes in below expectations. At the same time, he indicated that a larger 50-basis-point increase "should be considered" if inflation proves stronger than forecast.

The comments, reported by Coin Bureau on X, come as financial markets anticipate another monetary policy adjustment at the Federal Reserve's December meeting. Remarks from sitting Fed officials are closely watched because they offer a public window into the deliberations that shape the central bank's rate decisions, and Waller's comments arrive with expectations for December policy already running high. Figures cited by Coin Bureau show the odds of a December rate hike reaching 97.4%, the highest level recorded since the Federal Open Market Committee's (FOMC) most recent meeting.

Waller Favors a 25-Basis-Point December Hike

Waller's position suggests that a lower-than-expected inflation reading would not necessarily prevent the Federal Reserve from raising interest rates next month. According to Coin Bureau, he leans toward a 25-basis-point increase even if October inflation data comes in below market expectations, indicating that the possibility of another rate adjustment remains under consideration regardless of whether the upcoming figures show modest improvement.

A 25-basis-point increase represents a 0.25-percentage-point adjustment to the federal funds rate, the central bank's benchmark policy rate that influences borrowing costs across the economy. Such a move would mark another step in the Federal Reserve's efforts to manage monetary conditions.

50-Basis-Point Hike 'Should Be Considered' if Inflation Rises

Waller also outlined a more aggressive possibility should inflation prove stronger than anticipated. He said a 50-basis-point rate increase "should be considered" if inflation comes in higher than forecasts. A 50-basis-point adjustment would represent a 0.50-percentage-point increase, twice the size of the move he currently favors.

The distinction makes the upcoming inflation report particularly important to the December policy outlook. While Waller appears inclined toward a smaller increase under a lower-inflation scenario, stronger price pressures could put a larger adjustment on the table.

October Core CPI in Focus

The next key data point is October's Core Consumer Price Index (Core CPI), which is scheduled for release today. Figures cited by Coin Bureau show economists expect Core CPI to increase 0.2% month over month, compared with September's 0.3% increase. The projected slowdown would indicate a smaller monthly rise in underlying consumer prices.

Core CPI strips out volatile food and energy prices, which is why it is widely followed as a gauge of underlying inflation trends. Even so, Waller's comments suggest that an inflation reading below expectations would not necessarily eliminate the possibility of a December rate hike.

December Rate Hike Odds Reach 97.4%

Market expectations for another Federal Reserve rate increase have strengthened, with the reported probability of a December hike climbing to 97.4%. Coin Bureau reported that the figure represents the highest level since the last FOMC meeting, reflecting strong expectations for another monetary policy adjustment.

The upcoming Core CPI report and Waller's comments on the possibility of both 25-basis-point and 50-basis-point increases are now central details in the December rate outlook. The reported 97.4% odds remain the latest market expectation cited by Coin Bureau, and the Fed's December gathering remains the next scheduled point at which those threads converge into an actual policy decision.