CPI hasn’t been released yet, but a rate hike is already all but certain—the Fed’s Waller said one thing today, and the odds of a December hike shot straight from 76% to 96%.
Fed Governor Waller said at a conference in London today that even if tonight’s October CPI comes in below expectations, he would still support a 25-basis-point hike at the December meeting. If inflation comes in significantly hotter than expected, the Fed may need to take “more forceful action”—that is, raise rates by 50 basis points.
Markets immediately repriced: CME FedWatch showed the probability of a 25-basis-point hike in December leaping from 76.3% to 96.3%. Nasdaq 100 futures fell about 0.4%, $BTC dropped about 1.3%, and returned to around $74,100.
The consensus for the U.S. October CPI, due out tonight at 21:30, is a 0.3% month-over-month increase, down from September’s 0.6%. Waller also called out September’s inflation figures as “terrible”: PCE rose 0.5% month over month and 3.7% year over year. The federal funds rate currently stands at 3.75%–4%. The Fed meets on December 8–9, and a 25-basis-point hike would lift the range to 4.00%–4.25%.
This whale’s take: Tonight’s CPI suspense has changed. The question is no longer “Will they hike?” but “Will it be 25 or 50?” A cool reading might only keep the hike to 25 basis points, while a hot one means we’ll have to brace for a big 50-basis-point move. The odds of a hike have surged from 76% to 96%, and expectations of tighter liquidity have already moved ahead of the event. There’s a reason Bitcoin is stuck grinding around $74,000. What do you think? At 21:30 tonight, let’s first see what CPI says, then watch whether that 50-basis-point option moves from talk to action.
Fed Governor Waller said at a conference in London today that even if tonight’s October CPI comes in below expectations, he would still support a 25-basis-point hike at the December meeting. If inflation comes in significantly hotter than expected, the Fed may need to take “more forceful action”—that is, raise rates by 50 basis points.
Markets immediately repriced: CME FedWatch showed the probability of a 25-basis-point hike in December leaping from 76.3% to 96.3%. Nasdaq 100 futures fell about 0.4%, $BTC dropped about 1.3%, and returned to around $74,100.
The consensus for the U.S. October CPI, due out tonight at 21:30, is a 0.3% month-over-month increase, down from September’s 0.6%. Waller also called out September’s inflation figures as “terrible”: PCE rose 0.5% month over month and 3.7% year over year. The federal funds rate currently stands at 3.75%–4%. The Fed meets on December 8–9, and a 25-basis-point hike would lift the range to 4.00%–4.25%.
This whale’s take: Tonight’s CPI suspense has changed. The question is no longer “Will they hike?” but “Will it be 25 or 50?” A cool reading might only keep the hike to 25 basis points, while a hot one means we’ll have to brace for a big 50-basis-point move. The odds of a hike have surged from 76% to 96%, and expectations of tighter liquidity have already moved ahead of the event. There’s a reason Bitcoin is stuck grinding around $74,000. What do you think? At 21:30 tonight, let’s first see what CPI says, then watch whether that 50-basis-point option moves from talk to action.
