• All 101 economists polled by Reuters (NASDAQ:TRI) expect a December rate hike, with the fed-funds target seen rising to 4.00%–4.25%.
  • Governor Christopher Waller said a half-point increase should be considered if October core CPI rises 0.3% or more.
  • Markets are pricing an 87% chance of a quarter-point move, but Waller's comments introduce uncertainty about the size of the hike.

A Consensus, With a Caveat

A quarter-point increase at the Federal Reserve's December meeting is now about as close to a sure thing as financial markets ever get. All 101 economists surveyed by Reuters in a November 6–10 poll expect the central bank to lift its benchmark rate by 25 basis points, taking the federal-funds target range to 4.00%–4.25% from the current 3.75%–4.00%. Prediction markets assign an 87% probability to that outcome, with just 9% odds of a hold, according to data cited in the survey.

But the unanimity around December masks a more consequential debate: how big the increase will be—and how many more will follow. In remarks this morning, Fed Governor Christopher Waller kept a half-point move on the table, saying that if the October consumer-price report shows monthly core CPI rising 0.3% or more, policymakers should consider a larger increase. The October CPI report, due at 8:30 a.m. EST today, had not yet been released at the time of writing.

Waller also said he would support a quarter-point hike even if inflation improves, signaling that a December move is all but locked in regardless of today's data. Treasury yields rose following his comments, a reminder that markets remain highly sensitive to any hint of a faster tightening path.

Inflation Still Running Hot

The backdrop is an economy that has proven surprisingly resilient in the face of higher borrowing costs. September inflation, as measured by the Fed's preferred personal-consumption-expenditures index, was 3.7% year over year, with core PCE at 3.1%—both well above the central bank's 2% objective. Waller noted that more than 70% of core PCE services components recorded inflation of at least 3% in September, evidence that price pressures are broad rather than confined to a few categories.

He also flagged energy as a potential source of persistent inflation. Fed staff analysis suggests elevated oil prices could keep inflation aloft into 2027, and reduced refining capacity may sustain high diesel and other product prices even if crude prices decline.

The labor market, meanwhile, remains solid. Unemployment stands at 4.1%, and third-quarter GDP grew at a 3.4% annualized rate. Reuters reported that AI-related demand drove double-digit business-investment growth, while stock-market wealth supported consumer spending. Waller said he expects growth to moderate, not collapse.

A Divided Fed

The unanimity among economists contrasts with a more fractured picture inside the Federal Reserve. At its October meeting, the Fed held rates steady in a 10–2 vote, with Governors Lisa Cook and Beth Hammack dissenting in favor of an immediate quarter-point increase. That split underscores that agreement on December does not imply agreement on the terminal rate.

Futures markets are pricing a better-than-even chance of another increase by March, according to Reuters, while J.P. Morgan (NYSE:JPM)'s October 28 analysis anticipated 50 basis points of additional tightening going into 2027, conditional on inflation, growth, and financial conditions. The Reuters poll's consensus peak of 4.00%–4.25% should therefore be read as a snapshot, not a settled endpoint.

Political Crosscurrents

The political environment has also shifted. Last week's midterm elections gave Democrats majorities in both congressional chambers, which Waller said would act as a check on President Donald Trump's ability to shape Fed appointments. Separately, newly elected governors' pledges to restrain data-center expansion have contributed to investors reassessing AI-related growth expectations—a development that could influence both investment and inflation dynamics in the months ahead.

The immediate focus, however, is today's inflation report. Economists surveyed by Reuters expected October headline CPI to rise 0.3% month over month, down from 0.6% in September, and core CPI to rise 0.2%. A core reading of 0.3% or higher would bolster Waller's case for a half-point move and likely jolt markets. The November employment report, scheduled for December 4, is the other key input before the December 8–9 meeting.

A Fed spokesperson did not respond to a request for comment on Waller's remarks.

Correction: An earlier version of this article misstated the current fed-funds target range. It is 3.75%–4.00%, not 3.50%–3.75%.