Waller and Logan Open Door to Faster Fed Rate Hikes

Waller said Monday that inflation remained well above the Fed’s 2 percent goal, while economic activity was strong and the labor market stable. He supported holding rates steady at the latest meeting because markets had already priced in some tightening, but argued that the expected increases must be delivered within a reasonable period. Otherwise, expectations could fall and loosen financial conditions, he said.

He cited Fed staff research pointing to persistent inflation risks from elevated energy prices and investment in artificial intelligence. One analysis of purchasing managers’ surveys found signals of further price increases; October’s latest data pointed to more pressure ahead, Waller said. Other research suggested energy shocks may now feed into core inflation more strongly and last longer than before the pandemic, potentially well into 2027 if oil prices stay elevated.

Waller said he was leaning toward a 25-basis-point increase in December, but a stronger move could be warranted if October core CPI inflation matched the roughly 0.3 percent monthly readings of the prior two months. Both headline and core CPI subsequently came in above economists’ consensus forecasts, the source article reported.

Logan, speaking Tuesday at an energy conference hosted by the Federal Reserve banks of Dallas and Kansas City, said above-target inflation alongside a near-maximum-employment labor market required tighter policy. She said accommodative policy was adding to inflationary pressure and that skipping the October meeting did not alter the destination. Logan said the FOMC needed at least two additional 25-basis-point increases and could move faster this winter than it had in the fall.