Fed officials open door to a half-percentage-point rate hike as inflation worsens
TLT•US consumer prices rose 0.4% in October, while core CPI increased 0.3% for the third consecutive month. Fed officials said a half-percentage-point hike could be considered at the December meeting as markets weighed the prospect of faster rate increases.
1. Inflation and rate expectations
The odds of a half-percentage-point Federal Reserve rate hike next month rose after October inflation data showed persistent price pressures and officials signaled they could move faster. Core CPI rose 0.3% for the third straight month, above economists’ expectations for a slowdown to 0.2%; overall CPI rose 0.4%, down from 0.6% in September.
2. Officials weigh faster moves
Fed Governor Christopher Waller said a core CPI increase of 0.3% or more could mean a 50-basis-point hike should be considered at the December 8-9 meeting. Dallas Fed President Lorie Logan said it may be possible to move more rapidly than the quarter-point hike approved in September, and that rates should rise by at least half a percentage point before the Fed pauses. The yield on two-year Treasury notes rose by the most since early April 2025.
3. Price pressures persist
October data showed unexpected increases in auto insurance, public transportation and medical services. Inflation Insights President Omair Sharif said the data put core PCE inflation on track to rise 0.34% in October, an annualized pace of 4%.
