Fed's Waller Backs December Hike: What It Means for Mortgage Rates
Fed Governor Christopher Waller backed a December rate rise and put a half-point hike on the table if October inflation runs hot, hours before the CPI report.
Image: Wikimedia Commons / Federalreserve
LONDON, Nov 10 — Federal Reserve Governor Christopher Waller said on Tuesday he is leaning toward supporting a quarter-point interest-rate rise at the Federal Open Market Committee's December 8-9 meeting, and warned a half-point increase should be considered if October inflation runs hot. The Federal Reserve Board published the speech text at 09:00 GMT, hours before October consumer prices are released.
"If, as I expect, the monthly rate of inflation improves in October, I am leaning towards supporting an increase in our policy rate of 25 basis points," Waller told the Bank of England Watchers Conference in London. "But if the October CPI inflation data out later today are similar to the past two monthly readings — with core CPI inflation around 0.3% or even higher — then a stronger policy move may be needed."
Key Takeaways
- Waller's base case: a quarter-point December rise even if October inflation cools.
- A half-point move is on the table if October core prices rise 0.3% or more.
- Traders fully priced in a December hike; the two-year yield rose to 4.61%.
- October prices land at 8:30 a.m. Eastern; the decision comes December 8-9.
How the December Fed Rate Decision Affects Mortgage, Auto Loan, and Savings Rates
A December rise would lift the federal funds target range from 3.75%-4.00% to 4.00%-4.25%, or to 4.25%-4.50% on a half-point move. Short-term borrowing follows the policy rate, while mortgages track the 10-year Treasury yield, near 4.89%. Credit-card and auto-loan rates would rise within weeks, while savers would see deposit rates edge up.
The two-year Treasury yield rose six basis points to 4.61%, and traders moved to fully price in a December increase. CME Group's FedWatch tool had implied about an 85% chance of a hike at Monday's close.
What the October CPI Report Will Show and Why the Core Number Matters
Economists expect the October consumer price index to rise 0.3% on the month, slowing from September's 0.6% increase, with core prices — which strip out food and energy — up 0.2%. September's annual rate was 3.7%, but the Bureau of Labor Statistics will publish no official 12-month change for October.
"Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take," Waller said. He backed holding rates steady in October because markets had priced in tightening.
Brent crude slipped below $90 a barrel for the first time since August, easing the energy pressure in the inflation figures.
Will the Fed Raise Rates by 50 Basis Points in December?
A half-point move is the less likely outcome. Waller's condition — a third straight core reading of 0.3% or more — is a high bar, and futures pricing before his speech implied almost no chance of it. The speech changed the debate: before Waller spoke, the question was whether rates would rise at all in December; after it, the question is by how much.
The backdrop is a market fragile after the Democratic midterm sweep triggered a technology sell-off and a rush to safety. Stocks had posted their best day since April, with the S&P 500 rising 2.35% to 7,549.94, and banks have grown wary of lending into the sell-off.
| Key figure | Reading |
|---|---|
| Current federal funds target range | 3.75%-4.00% |
| Range after a quarter-point hike | 4.00%-4.25% |
| Range after a half-point hike | 4.25%-4.50% |
| October CPI release | Tuesday, 8:30 a.m. Eastern |
Frequently Asked Questions
Will the Federal Reserve raise interest rates in December 2026?
Waller said he is leaning toward supporting a quarter-point increase in December, and traders moved to fully price in a hike. A half-point move would be considered only if October core prices rise 0.3% or more.
What is the October CPI report expected to show?
Economists expect headline prices to rise 0.3% on the month and core prices to rise 0.2%. No official 12-month rate will be published for October because October 2025 prices were not collected during last year's shutdown.
How would a December rate hike affect mortgage rates?
Mortgages track longer-dated Treasury yields such as the 10-year yield, so they would move mainly on what the inflation report says about the path beyond December. Credit-card and auto-loan rates would rise within weeks.
What is the current federal funds rate target range?
The target range is 3.75%-4.00%. A quarter-point increase would lift it to 4.00%-4.25%, while a half-point increase would take it to 4.25%-4.50%.
October consumer prices are released at 8:30 a.m. Eastern on Tuesday, and the Federal Open Market Committee meets on December 8-9.
