Fed officials open door to quicker rate hikes as inflation worsens
TLT•US consumer prices rose 0.4% in October, while core CPI rose 0.3% for the third straight month. Fed officials said a quicker pace of rate hikes was possible, and markets briefly priced in about a 15% chance of a half-point increase in December.
1. Inflation stays persistent
The Consumer Price Index rose 0.4% in October, down from 0.6% in September as energy inflation receded. Core CPI, which excludes food and energy, rose 0.3% for the third consecutive month; economists polled by Reuters had expected 0.2%.
2. Officials weigh faster hikes
Fed Governor Christopher Waller said he planned to support a quarter-point increase at the December 8-9 meeting unless core CPI rose at least 0.3%. In that case, he said, a 50-basis-point increase should be considered. Dallas Fed President Lorie Logan said it may be possible to move more rapidly and that rates should rise by at least another half percentage point before the Fed pauses to assess conditions.
3. Markets reassess outlook
The inflation data and officials’ comments drove a selloff in US Treasuries, with the two-year yield posting its biggest rise since early April 2025. Market pricing briefly showed about a 15% chance of a half-point hike in December, later falling to about 10%; traders also increased bets on three quarter-point hikes by mid-2027, rather than two.
