【TMGM Financial Recap】More Rate Hikes at a Faster Pace? Fed Voting Member Logan Sounds Hawkish as December Hike Odds Hit 100%

Markets have already priced in a December rate hike with a probability of 100%, while the likelihood of a 50-basis-point increase has climbed from 0% to 15.3%. Against this backdrop, Logan, who has voting rights on the FOMC this year but becomes a non-voting member in 2027, echoed the framework set out that same day by Fed Governor Christopher Waller: a 25-basis-point hike in December, with 50 basis points possible if required. Her comments stood apart from Chair Kevin Warsh’s more cautious approach and his unwillingness to offer guidance on the interest rate path.

Her record of voting provides further context. Having dissented against a similar decision in July, Logan joined the majority on 28 October in voting to leave rates unchanged. Two points emerge from that sequence: she does not consistently demand rate increases irrespective of the data, and she opted to back the majority in October. Yet she regards the current rate level as “not restrictive enough,” not “broadly appropriate.” Explaining her reasoning in remarks on 10 November, she said: “The longer inflation stays above target, the greater the risk that inflation expectations become embedded in market behaviour.”

Compared with an official who has advocated higher rates throughout, a voting member who dissented in July, held back in October and returned in November to seek “at least two” hikes, possibly at a quicker pace, conveys a more forceful signal. Rather than reflecting an unchanging policy position, her push for increases rests on her judgement that the data now justify action.

Even so, her appeal for “at least two more” hikes was immediately followed by a description of when a pause would be appropriate: “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.”

Calling for a “pause” is not the same as declaring the hiking cycle “over.” In her formulation, two increases would create an opportunity for policymakers to review conditions, not mark the end of tightening. Unlike a “terminal rate”, this sets a minimum number of policy actions rather than identifying a specific interest rate level. Decisions beyond that point would depend on the data.

A further argument underlined her sense of urgency: “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.” Her use of “as soon as possible” aligns with the possibility she raised of a faster pace this winter. The aim, in Logan’s reasoning, is to make policy sufficiently restrictive before inflation expectations become entrenched, instead of moving rates gradually towards a preselected level.

How Do Logan and Waller’s Same-Day Signals Point in One Direction?

Although framed differently, the message delivered by Fed Governor Christopher Waller on the day of Logan’s remarks pointed in the same direction. His base case calls for a 25-basis-point increase in December, subject to a qualification: inflation exceeding expectations, as it did in that day’s CPI release, could require the Fed to raise rates by 50 basis points. At the heart of his argument was the credibility of policy: “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.”

Where Logan proposes “at least two hikes, potentially at a faster pace this winter.” Waller sets out “at least 25 basis points in December, with 50 if inflation exceeds expectations.” Their approaches differ in how future moves are defined. A minimum number of increases anchors Logan’s position; Waller instead describes how inflation could determine the size of one increase. Both nevertheless judge the current policy rate inadequate to bring inflation back to target, with waiting carrying a greater cost than taking action.

Chair Warsh has taken a markedly different approach, withholding advance guidance on the rate trajectory and declining to commit to the size of a December increase. By making forward guidance less explicit, his communication strategy seeks to retain policy flexibility. Logan and Waller, through their different formulations on the same day, supplied information that Warsh had left open.

What Has the Market Priced In?

Hawkish repricing was already evident a day before Logan’s comments. Stronger-than-expected October CPI figures prompted a shift on 10 November: CME FedWatch put the probability of a 50-basis-point December increase at 15.3%, up from 0% a day earlier. With a 25-basis-point move assigned a probability of 84.7%, the combined likelihood of a December hike reached 100%. By comparison, a week earlier markets had placed the probability of a 25-basis-point December increase at around 95.6%, while still assigning a 4.4% likelihood to unchanged rates.

Evidence beyond CPI also supported the repricing. Released on 6 November, the October nonfarm payrolls report recorded 165,000 additional jobs, substantially exceeding market expectations of around 70,000. Upward revisions to August and September employment totalled 84,000. Alongside a decline in the unemployment rate from 4.18% to 4.14%, labour force participation increased for the third month in a row, reaching 61.9%. In Guotai Haitong’s assessment, the employment report “weakened the case for the Fed to remain on hold because of a slowing labour market.” At the same time, September core PCE inflation held at 3.1% year on year, remaining above the 2% target.

By assigning a “100% probability in December”, the market is treating a December increase as its base case. Attention has therefore shifted to two remaining uncertainties: will the increase be 25 or 50 basis points, and will it be followed by a further hike? It is the latter question that Logan addresses with her call for “at least two”.