Former Fed Vice Chair Roger Ferguson Sees Potential For A 50-Basis-Point Rate Hike In December

• In an interview with CNBC, Ferguson said that if the Fed doesn't raise rates next time, it may “risk losing some credibility.” 
• September headline PCE inflation rose to 3.6%, while third-quarter GDP grew 3.4%.
• Initial jobless claims stood at 194,000, while continuing claims declined to 1.701 million.

Former Federal Reserve Vice Chair Roger Ferguson said Thursday that a 50-basis-point interest rate hike in December is possible, depending on how developments unfold. 

Meanwhile, personal consumption expenditures (PCE) inflation accelerated to 3.6% in September, in line with estimates.

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September's Core PCE inflation rose to 3.1% from 3.0%, in line with estimates, with Ferguson noting that the figure remained above the Fed's 2% target. 

Ferguson Says Fed Could Risk Losing Some Credibility

In an interview with CNBC, the economist said, “If they don't raise rates next time, I think they are going to risk losing some credibility.” 

The former Fed Vice Chair said he expects a December rate hike and the possibility of one or two additional increases in 2027. "If there's not a hike in December, some alarm bells will go off in the markets," Ferguson remarked.

What Could Determine A 50-Basis-Point Hike?

When asked what conditions could warrant a 50-basis-point hike in December, Ferguson said he would watch other FOMC members' positions and whether financial conditions continue to tighten before assessing the possibility of a larger December hike.

The Fed voted 10-2 on Wednesday to maintain interest rates at 3.75%–4%, with Lisa Cook and Beth Hammack favoring a quarter-point increase.

Thursday's data also showed that third-quarter gross domestic product (GDP) grew at an annualized rate of 3.4%, up from 2.2% in the previous quarter. Initial jobless claims stood at 194,000, while continuing claims declined to 1.701 million.

Asked whether strong economic growth alone would justify a rate hike if oil prices declined and inflation pressures eased, Ferguson said he would not raise rates solely because GDP grew 3.4%.

Indices Trade In The Red

U.S. equities fell Thursday as disappointing corporate earnings weighed on major indexes. The Nasdaq Composite dropped 1.4%, while the S&P 500 declined 0.5%. The Dow Jones Industrial Average shed nearly 300 points.

On Stocktwits, retail sentiment toward the SPDR S&P 500 ETF Trust (SPY) was ‘bullish’, while sentiment toward the SPDR Dow Jones Industrial Average ETF Trust (DIA) and Invesco QQQ Trust (QQQ) was ‘bearish’.

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