Two days ago I wrote about Fed presidents Daly and Musalem signaling more rate hikes after October payrolls came in at 165k against a…

Two days ago I wrote about Fed presidents Daly and Musalem signaling more rate hikes after October payrolls came in at 165k against a 65k forecast. Today a sitting Fed governor went further. Christopher Waller said in London that he'd support at least a 25bp hike at the December 8-9 meeting, even if October inflation shows improvement over September.

He also set a specific trigger. If core CPI rises 0.3% or more month-over-month, against the roughly 0.2% economists expect, Waller said "a 50 basis point hike in the policy rate should be considered at the December meeting." On credibility, his phrasing was "a risk I am not eager to take."

For context, markets were pricing about an 85% chance of a December hike as of Monday's close, and largely a quarter-point move. That figure applies to the 25bp scenario and says nothing about 50bp. Treasuries moved anyway. Early this morning the 2-year rose to about 4.61% and the 10-year to about 4.90%. Core PCE was 3.1% year over year in September, and Waller noted more than 70% of core PCE services components rose 3% or more that month.

The October CPI print lands at 8:30am ET today, and it will come without a year-over-year rate, since October 2025 prices were never collected during the shutdown. In Waller's framing, a single tenth on monthly core separates a 25bp conversation from a 50bp one.

Paychecks are already squeezed: average hourly earnings are up 3.1% over the year, while headline CPI ran 3.7% in September. I keep coming back to the same question I asked two days ago: who absorbs a half-point hike into that gap first?

Sources:
Reuters: https://www.reuters.com/business/feds-waller-plans-support-least-quarter-point-rate-hike-december-2026-11-10/
CNBC: https://www.cnbc.com/amp/2026/11/10/us-bonds-treasurys-yields.html

Not financial advice. For informational and educational purposes only.