A Fed governor sets a test for a half-point hike, October’s inflation passes it, and the Aussie dollar takes the hit

Christopher Waller told an audience in London on Tuesday, before the latest US inflation figures were released, that he was “leaning toward supporting an increase” of a quarter of a percentage point when the Federal Reserve’s rate-setting committee meets on 8 and 9 December. Then he added a condition: if core consumer prices for October rose “around 0.3 percent or even higher”, a half-point rise should be considered.

At 8.30am in Washington, the Bureau of Labor Statistics reported that core prices, which strip out food and energy, rose 0.3% in October. Economists had expected 0.2%. Headline prices rose 0.4%, against forecasts of 0.3%.

Waller is one of the seven governors on the Fed’s board and has a permanent vote on rates. He was not alone. Dallas Fed President Lorie Logan, who votes this year, told an energy conference in Houston she expected two more increases before it would make sense to pause.

How did markets react?

Wall Street ended lower after an early slide eased. The S&P 500 fell 0.38% to 7,520.93, the Dow Jones Industrial Average lost 0.30% to 52,231.89 and the Nasdaq Composite fell 0.74% to 25,065.87. Nvidia, already under pressure over its chief executive’s personal conduct and a board investigation, fell about 5.5% and briefly dropped below a US$4 trillion market value during the day.

The yield on the US 10-year Treasury bond climbed to about 4.99% after briefly passing 5% during the session. Spot gold fell 2.7% to about US$4,026 an ounce, and Bitcoin lost 2.2%.

Traders in rate markets have now fully priced in a December rise. Only a small chance of a half-point move is priced, which is why Waller’s comments matter: they come from a voter on the committee, not a commentator.

What does it mean for Australia?

The Australian dollar fell almost 1% to 68.63 US cents, which makes US goods, holidays and streaming subscriptions billed in US dollars a little dearer, and lifts the value of the US earnings of ASX companies.

ASX 200 futures were down about 0.5% at 9,036 early on Wednesday, after the index closed 1.1% higher on Tuesday at 9,129. Australia’s 10-year government bond yield sits at about 5%, roughly level with America’s.

When the world’s biggest central bank is raising rates, it keeps pressure on borrowing costs everywhere, including the long-term rates that shape fixed-rate home loans in Australia.

Why is the Fed raising rates at all?

Inflation in the US has picked up again, pushed by energy costs during the Iran war and by heavy spending on artificial intelligence data centres. Chicago Fed President Austan Goolsbee said on Monday the AI build-out looks like “old-fashioned demand overheating”. There is no official annual inflation figure for October, because October 2025 prices were never collected during the US government shutdown, which leaves the Fed working from monthly readings.

What would change it?

The November inflation report, due on 10 December, lands the day after the Fed’s decision, so October’s numbers are the last full read the committee gets. Oil has fallen sharply over the past fortnight on hopes of a diplomatic end to the Iran war, with US petrol back below US$4 a gallon for the first time since July. If that holds, it could take some heat out of later readings, but not in time for December.

Go deeper with VNN Premium: A half-point Fed hike adds US$500 a year to a US$100,000 HELOC. A US$10,000 card balance costs that in under 12 weeks — what a quarter or half point costs on home equity lines and cards at three balance sizes, and the break-even for locking a HELOC.