Fed's Waller revives case for aggressive December rate move

Market wrap:

• WTI crude oil fell 1.59% to $85.45
• Gold declined 1.52% to $4,075
• NZD was strongest, JPY weakest
• S&P 500 edged up 0.07% to 7579.25
• US 10-year Treasury yield rose 1 basis point to 4.892%
• Bitcoin slipped 0.86% to $74,299

Without Waller's hawkish comments, the session would have been fairly subdued. In a notable shift, Waller suggested a 50 basis point rate increase in December could be appropriate if the core CPI month-over-month reading came in at 0.3% or higher today. He also indicated that a 25 basis point hike would still be justified even if October's inflation data turned out better than September's.

Waller, who holds significant sway as a governor, has served as a key gauge for the Fed's direction since 2021. He expressed a willingness to give disinflation a chance in September but has since reversed his stance. Following his remarks, the probability of a December rate hike jumped to 99%, and a hot CPI figure today could boost the odds of a 50 basis point move.

On US-Iran matters, no fresh developments have emerged since yesterday's positive reports. As previously noted, meetings between Trump, Vance and the Qatari Prime Minister were constructive, and they explored advancing talks with Iran. Trump stated after discussions that Qatar would prefer a peaceful resolution with Iran, but the US is prepared to launch strikes if needed.

Reports also indicated that the US has permitted a small amount of uranium enrichment within Iran, which Tehran accepted, and a preliminary deal on reducing enrichment levels appears likely. A concrete breakthrough remains elusive, so the longer the standoff continues, the greater the risk of oil prices rising again.