【TMGM Financial Recap】December Rate Hike Odds Rise to 100% as Fed Voting Member Logan Signals a Hawkish Tilt Towards More, Faster Hikes

The probability of a 50-basis-point December rate increase has climbed from 0% to 15.3%, with markets now assigning a 100% likelihood to a hike that month. Logan’s remarks reinforced the framework presented earlier that day by Fed Governor Christopher Waller: a 25-basis-point December increase, potentially rising to 50 basis points if necessary. A voting member of the FOMC this year, Logan will have no vote in 2027. Her message also marked a departure from Chair Kevin Warsh’s caution and reluctance to give guidance on the future path of interest rates.

July’s dissent and October’s support for unchanged rates provide important context for Logan’s position. After opposing a similar decision in July, she voted with the majority to hold rates steady on 28 October. Two conclusions follow: her preference for higher rates is not unconditional or detached from the data, and in October she was prepared to support the majority. Nevertheless, she considers the prevailing rate level “not restrictive enough,” rather than “broadly appropriate.” Her explanation came in remarks on 10 November: “The longer inflation stays above target, the greater the risk that inflation expectations become embedded in market behaviour.”

That sequence gives her renewed demand for tightening greater weight than a consistently hawkish position would carry. Having dissented in July and waited in October, a voting member calling in November for “at least two” increases, possibly delivered more quickly, is sending a stronger signal. The shift reflects her judgement that the latest data justify action, not an inflexible preference for higher rates.

Her proposal also included a point at which to reassess. Immediately after advocating “at least two more” increases, she set out the circumstances for pausing: “After completing these two rate hikes, I believe it would be appropriate to pause, assess economic and financial conditions, and then determine whether further action is needed.”

Two increases would therefore provide a review point, not necessarily bring tightening to an end: a “pause” would not mean the cycle was “over.” That is an important departure from specifying a “terminal rate”. Rather than naming an interest rate level, Logan established a minimum number of policy steps, after which the data would determine whether further tightening was required.

The urgency of her position was clearer in another argument: “More restrictive monetary policy is needed to appropriately balance the outlook and risks for inflation and employment, and that balance needs to be achieved as soon as possible.” By saying “as soon as possible”, she reinforced her suggestion that increases could come more rapidly this winter. The objective is not a gradual approach to a predetermined rate, but to ensure policy becomes sufficiently restrictive before inflation expectations take root.

Logan and Waller Reinforce the Case for Higher Rates on the Same Day

A December increase of 25 basis points forms Fed Governor Christopher Waller’s central scenario. Speaking on the same day as Logan, he reached a similar conclusion through a differently framed argument. He left open the possibility of a 50-basis-point rise should inflation come in above expectations, as it had in that day’s CPI figures. Policy credibility was central to his reasoning: “If a rate hike already priced in by markets fails to materialise, markets will immediately scale back expectations for further hikes, real interest rates will decline, and monetary policy will experience an unintended easing.”

A minimum count of increases distinguishes Logan’s approach from Waller’s inflation-dependent choice of size for a single move. She proposes “at least two hikes, potentially at a faster pace this winter.” He envisages “at least 25 basis points in December, with 50 if inflation exceeds expectations.” Despite those different formulations, both consider the existing policy rate too low to restore inflation to target. Both also judge that delaying action would be more costly than proceeding.

Warsh, by contrast, has left both the rate trajectory and the scale of a December increase unspecified. By offering less explicit forward guidance, the Chair’s communication approach seeks to preserve room for manoeuvre on policy. The two sets of remarks from Logan and Waller on the same day each supplied detail that Warsh had withheld, although they did so in different forms.

Markets Price In a December Increase as 50-Basis-Point Odds Rise

October CPI exceeding expectations had already driven markets towards a more hawkish outlook on 10 November, the day before Logan spoke. According to CME FedWatch, the likelihood of a 50-basis-point increase in December reached 15.3%, compared with 0% the preceding day. A 25-basis-point rise carried an 84.7% probability, leaving the combined chance of a December hike at 100%. Just a week earlier, markets had assigned around 95.6% to a 25-basis-point increase and retained a 4.4% chance of rates staying unchanged.

Labour market figures provided further grounds for the shift, alongside CPI. Published on 6 November, October’s nonfarm payrolls report put job growth at 165,000, well ahead of expectations of around 70,000. Revisions added a further 84,000 to the combined August and September employment figures. While unemployment eased to 4.14% from 4.18%, labour force participation reached 61.9% following its third successive monthly increase. Guotai Haitong concluded that the report “weakened the case for the Fed to remain on hold because of a slowing labour market.” September’s core PCE inflation reading, meanwhile, was unchanged at 3.1% year on year, still exceeding the 2% target.

With markets quoting a “100% probability in December”, a rate increase that month has become the central assumption. The debate now concerns its scale, 25 or 50 basis points, and whether a subsequent increase will follow. It is on that second uncertainty that Logan’s demand for “at least two” offers a view.