Hot CPI Seals a December Fed Hike
October’s inflation report came in hotter than expected, and it has settled the question of whether the Fed will raise rates again in December. Consumer prices rose 0.4% on the month, against the 0.3% economists had forecast.
Markets reacted quickly. Treasury yields moved above 5% and US stocks sold off. Gold fell nearly 3% to around $4,020.
A quarter-point hike in December is now fully priced in, and the odds of a half-point move have risen to around 10% from zero before the data. That shift follows comments from Fed Governor Christopher Waller, who said a half-point hike may be needed if October core CPI came in around 0.3% or higher. Even Citi, which had expected no more moves this year, now forecasts a 25bp hike in December and then a hold until cuts begin in June 2027.
The bigger concern may be what comes after December. Morningstar’s Preston Caldwell said the milder readings of the summer now look like a false signal, and that more data like this could lead to several hikes in 2027.
The December hike itself is now the baseline. What traders are watching is whether it is 25 or 50 basis points, and how much further the Fed goes next year.
#hotcpidecemberhikepriced #cpi #december
October’s inflation report came in hotter than expected, and it has settled the question of whether the Fed will raise rates again in December. Consumer prices rose 0.4% on the month, against the 0.3% economists had forecast.
Markets reacted quickly. Treasury yields moved above 5% and US stocks sold off. Gold fell nearly 3% to around $4,020.
A quarter-point hike in December is now fully priced in, and the odds of a half-point move have risen to around 10% from zero before the data. That shift follows comments from Fed Governor Christopher Waller, who said a half-point hike may be needed if October core CPI came in around 0.3% or higher. Even Citi, which had expected no more moves this year, now forecasts a 25bp hike in December and then a hold until cuts begin in June 2027.
The bigger concern may be what comes after December. Morningstar’s Preston Caldwell said the milder readings of the summer now look like a false signal, and that more data like this could lead to several hikes in 2027.
The December hike itself is now the baseline. What traders are watching is whether it is 25 or 50 basis points, and how much further the Fed goes next year.
#hotcpidecemberhikepriced #cpi #december
