The only question about a December rate hike is whether it will be 25 or 50 basis points. CME’s FedWatch tool shows an approximately 87% probability of a 25-basis-point hike at the December 8–9 meeting and a 13% probability of a 50-basis-point hike; prediction market Kalshi puts the probability of a hike as high as 99%. A week ago, the probability of a 50-basis-point hike was still 0%, while the probability of no hike was above 23%. Now the probability of no hike has fallen to zero.
A basis point is the smallest unit commonly used to quote interest-rate changes. One basis point equals 0.01 percentage points, so 25 basis points is 0.25 percentage points and 50 basis points is 0.5 percentage points.
The trigger was two scorching inflation reports: the Consumer Price Index rose 0.4% month over month in October, above the market forecast of 0.3%; and the Producer Price Index rose 6.5% year over year in October, its highest level since November 2022. Fed Governor Waller said that if core CPI stayed around 0.3% month over month, the Fed should consider a 50-basis-point hike in December. As it turned out, October core CPI was exactly 0.3%. Dallas Fed President Logan was even more direct: rate hikes could come sooner than expected. New York Fed President Williams, Chicago Fed President Goolsbee, and Boston Fed President Collins all spoke in turn this week, delivering a consistent message: inflation is still too high, and the direction of policy tightening is clear.
Markets have already penciled in rate hikes: not just in December, but also in January and March next year, with consecutive increases now priced in. Bank of America has included three rate hikes in its forecast, while Santander expects one each in December and March. The 10-year Treasury yield has climbed above 5.15%, and the U.S. Dollar Index has touched a 19-month high of 103.17. Money is flowing into the dollar and Treasuries.
The chain reaction is clear: rising rate-hike expectations push up 10-year Treasury yields, strengthen the dollar, pressure growth-stock valuations, and weigh on Bitcoin. The Nasdaq Composite’s 5.5% one-day drop on November 5, its biggest daily fall in more than a year, was a preview of this force at work. The Philadelphia Semiconductor Index fell 3.4% on Friday, Nvidia dropped 2.01% in a single day, and Advanced Micro Devices fell 8.75%. High-valuation sectors are taking the first hit.
The real showdown is on November 25: the Personal Consumption Expenditures Price Index released that day will be the last inflation report the Fed gets before its December decision. The PCE price index is the Fed’s most closely watched inflation gauge. Fed Chair Warsh has said the goal is to bring it back to 2%. Warsh is also due to speak on November 16, effectively showing his hand in advance.
Keep an eye on two scenarios: if the November 25 PCE price index comes in hotter than expected again, the odds of a 50-basis-point hike will keep climbing, and tech stocks and Bitcoin could take another hit. If the data cools, a 25-basis-point hike may turn out to be a case of bad news already priced in. During a rate-hiking cycle, data matters more than talk. Before November 25, don’t rush to chase rallies or buy the dip.
#美联储 #RateHike
$QQQ $NVDA $SPY
A basis point is the smallest unit commonly used to quote interest-rate changes. One basis point equals 0.01 percentage points, so 25 basis points is 0.25 percentage points and 50 basis points is 0.5 percentage points.
The trigger was two scorching inflation reports: the Consumer Price Index rose 0.4% month over month in October, above the market forecast of 0.3%; and the Producer Price Index rose 6.5% year over year in October, its highest level since November 2022. Fed Governor Waller said that if core CPI stayed around 0.3% month over month, the Fed should consider a 50-basis-point hike in December. As it turned out, October core CPI was exactly 0.3%. Dallas Fed President Logan was even more direct: rate hikes could come sooner than expected. New York Fed President Williams, Chicago Fed President Goolsbee, and Boston Fed President Collins all spoke in turn this week, delivering a consistent message: inflation is still too high, and the direction of policy tightening is clear.
Markets have already penciled in rate hikes: not just in December, but also in January and March next year, with consecutive increases now priced in. Bank of America has included three rate hikes in its forecast, while Santander expects one each in December and March. The 10-year Treasury yield has climbed above 5.15%, and the U.S. Dollar Index has touched a 19-month high of 103.17. Money is flowing into the dollar and Treasuries.
The chain reaction is clear: rising rate-hike expectations push up 10-year Treasury yields, strengthen the dollar, pressure growth-stock valuations, and weigh on Bitcoin. The Nasdaq Composite’s 5.5% one-day drop on November 5, its biggest daily fall in more than a year, was a preview of this force at work. The Philadelphia Semiconductor Index fell 3.4% on Friday, Nvidia dropped 2.01% in a single day, and Advanced Micro Devices fell 8.75%. High-valuation sectors are taking the first hit.
The real showdown is on November 25: the Personal Consumption Expenditures Price Index released that day will be the last inflation report the Fed gets before its December decision. The PCE price index is the Fed’s most closely watched inflation gauge. Fed Chair Warsh has said the goal is to bring it back to 2%. Warsh is also due to speak on November 16, effectively showing his hand in advance.
Keep an eye on two scenarios: if the November 25 PCE price index comes in hotter than expected again, the odds of a 50-basis-point hike will keep climbing, and tech stocks and Bitcoin could take another hit. If the data cools, a 25-basis-point hike may turn out to be a case of bad news already priced in. During a rate-hiking cycle, data matters more than talk. Before November 25, don’t rush to chase rallies or buy the dip.
#美联储 #RateHike
$QQQ $NVDA $SPY