Fed governor Waller backs a December rate increase as bitcoin trades near $74,000

Federal Reserve Governor Christopher Waller said on Tuesday he would support a 25 basis point rate increase at the Fed's December meeting, hours before the October consumer price report, according to the text of his speech in London. Bitcoin (BTC) traded near $74,229 at 11:11 a.m. UTC, according to Coinbase's spot price.

A rate path that crypto markets read, set out in a governor's own words

Waller, a member of the Fed's Board of Governors, spoke at the Bank of England Watchers Conference. He said he voted with the majority of the Federal Open Market Committee (FOMC) to hold the policy rate at its latest meeting, and that the timing of further increases matters less than carrying them out.

"I would still support a 25 basis point increase in the FOMC's policy rate at our December meeting," Waller said, even if October inflation improves on September. He added that if the October consumer price index (CPI) showed core inflation "around 0.3 percent or even higher," a 50 basis point increase "should be considered at the December meeting."

The inflation figures behind the stance

Waller said inflation based on personal consumption expenditures (PCE), the measure the Fed targets, rose 0.5% in September from August and 3.7% over the previous 12 months. Core PCE, which excludes food and energy, rose 0.3% on the month and 3.1% from a year earlier.

He described the labor market as stable. The unemployment rate ticked down to 4.1% in October, and the initial estimate of third-quarter real gross domestic product growth was 3.4%, he said. He also said Fed staff research suggested energy price pressures could pass through to goods and services in a more sustained way than in the past.

What the price shows, and what it does not

Bitcoin's spot price was $74,229.01 at 11:11 a.m. UTC on Tuesday, and ether (ETH) was $2,094.52 at the same time, according to Coinbase. A spot price is a single reading; it does not show how either asset moved during the day or why.

Waller's speech does not mention digital assets. The link between rate expectations and crypto prices is therefore not something this speech establishes, and a single day's price cannot establish it either.

Why we would watch the rate path before the price

We think a hawkish Fed matters to crypto mainly through leverage and financing conditions, which is where our line on the sector looks first, rather than through any single day's price. Waller's speech gives a conditional path: a 25 basis point increase in December if inflation cooperates, and a larger one if it does not. That is one governor's view, not a committee decision.

The threat is that a larger-than-expected move would tighten conditions for leveraged positions in derivatives. The opportunity is a clearer path for rates, which would let markets price crypto assets, and the businesses around them, on their own news. We do not forecast price levels, and nothing in the speech lets us. We would watch the October CPI report and the FOMC's December decision; our view would change if core inflation came in well below Waller's 0.3% marker.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.