Fed’s Waller opens door to half-point December hike, raising borrowing-cost risks

Federal Reserve Governor Christopher Waller said on November 10 that he supports a 0.25-percentage-point rate increase in December and could back a 0.5-point increase if inflation is substantially higher than he expects. He had supported the Fed’s October pause on the condition that it follow through on market expectations for further tightening.^[1][2]

Later coverage reported that October core consumer prices—prices excluding food and energy—rose 0.3% from the previous month, meeting Waller’s stated threshold for considering a half-point hike. Investors subsequently raised the odds of that larger increase; the Fed has yet to make its December rate decision.^[3][4]

When investors expect a larger hike, bond yields and the cost of new loans can rise before the Fed acts. Investors increased their expectations for a half-point move that day, although its eventual size still depends on the data and the Fed’s collective decision.^[4][2] On November 10, the two-year Treasury yield rose to 4.73% from 4.56% in the previous session, while the ten-year rose to 4.98% from 4.88%.

Treasury yields help set prices for many loans and corporate bonds. Higher yields make new borrowing and refinancing maturing debt more expensive, while higher mortgage costs reduce homebuyers’ purchasing power. Investors also demand higher returns from stocks, pressuring valuations supported mainly by profits many years away; the impact depends on how long rates stay elevated and when businesses need financing.^[4]

Impact

What to watch next

• November 12: Several Fed officials are scheduled to speak; support for a half-point hike would show how broadly Waller’s position is shared.
• November 13: October producer prices are expected to rise 0.4% month over month, after 1.3%. The result will test whether upstream price pressures are easing, informing the case for further tightening.