DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Federal Reserve officials Christopher Waller and Lorie Logan signaled that policymakers may need to raise interest rates higher and faster as stubborn inflation threatens the central bank’s credibility. Their remarks included explicit guidance about future policy and concrete projections for additional rate increases under the Warsh regime.

Waller, a Fed governor, told the Bank of England Watchers Conference in London that elevated inflation had put the central bank’s credibility at stake. He said a 50 basis point increase may be necessary to protect that credibility.

“At our most recent meeting, I supported the FOMC majority in holding monetary policy at its current setting,” Waller said. “[M]y rationale was that the Committee's communication about the likely tightening of policy had already led financial markets to price in some tightening.”

Waller argued that clear and credible communication can influence financial conditions before policymakers formally raise rates. Still, he warned that officials must ultimately deliver the increases they have indicated are coming.

“If, however, the hikes are not carried out, markets will reduce expectations of rate hikes and rates will immediately fall, which would loosen monetary policy in an undesirable way,” he said. “So, while the precise timing of the hikes doesn't matter, ensuring that the promised hikes are implemented in a reasonable period of time does.”

After assessing the broader economy and labor market, Waller focused on inflation risks associated with elevated energy prices and capital spending tied to artificial intelligence. He said Federal Reserve research offered little reason to expect those pressures to disappear soon.

“Federal Reserve staff have been thinking hard about the effects on inflation of the AI buildout and elevated energy prices, and their findings do not encourage me to think that these factors will be fading anytime soon,” Waller said.

He cited research using purchasing manager surveys from the Institute for Supply Management to identify potential price pressures. Waller said an index for high tech products rose in December 2025 and advanced further in January 2026 before related increases appeared in February producer price and inflation data.

“The most recent ISM data, for October, point to the possibility of more price increases ahead,” he said. Waller also highlighted Federal Reserve research indicating that energy costs may now pass through to goods and services more persistently than they did before the pandemic.

“The researchers find a potential shift in the inflation process after the pandemic that suggests core inflation may be more responsive to energy shocks,” Waller said. The analysis indicated that if oil prices remain elevated, the resulting inflation pressure could be larger than previously expected and continue well into 2027.

Waller described economic activity as strong and the labor market as stable, but said inflation remained well above the FOMC’s 2% target. He indicated that he was leaning toward supporting a 25 basis point rate increase at the December meeting if monthly inflation improved in October.

His position would become more aggressive if October’s CPI figures resembled the previous two monthly readings. Waller specifically identified core CPI inflation near 0.3% or higher as a scenario that could require a stronger move.

“In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting,” Waller said. “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”

Headline and core CPI both exceeded economists’ consensus forecasts. That result suggests Waller is prepared to support a 50 basis point increase in December and argue that other policymakers should join him.

Dallas Fed President Lorie Logan later delivered a similarly sober assessment. She said the FOMC was meeting only one of its two objectives when inflation remained too high while the labor market stayed near maximum employment and continued tightening.

“Tighter policy will be necessary to appropriately balance the outlook and risks for inflation and employment,” Logan said. “The longer above-target inflation persists, the greater the risk that it becomes baked into behavior.”

Logan said accommodative monetary policy was adding to inflation pressure. She noted that the FOMC held rates steady in October after approving a 25 basis point increase in September, when markets had been volatile amid technology investment news and geopolitical developments.

Although gradual adjustments can help households, businesses and market participants adapt, Logan said skipping one meeting did not change the ultimate policy destination. “It remains clear to me, given the current outlook, that the FOMC needs to implement at least two more 25-basis-point rate increases.”

“It may be possible to move more rapidly this winter than the FOMC has moved so far this fall,” Logan added. Together, the officials’ remarks placed both a 50 basis point December increase and multiple additional hikes firmly on the table.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.