In brief
The U.S. CPI rose 0.4% in October and the core CPI climbed 0.3%, both higher than analysts predicted. Treasury yields surged, and economists think a 50‑basis‑point Fed hike in December is likely. Fed officials and market participants keep a close eye on the sticky inflation reading.
In New York on Tuesday, U.S. consumer prices rose 0.4% in October, higher than the 0.3% economists expected, according to the Bureau of Labor Statistics and reported by Xinhua.
The core inflation metric, which strips out food and energy prices, also rose 0.3% month‑over‑month. At an annualized pace of roughly 3.6%, the core rate is well above the Federal Reserve’s 2% target, according to Xinhua.
Reaction from bond markets was sharp. The two‑year Treasury yield jumped about 15 basis points to more than 4.7%, its largest one‑day gain since early April 2025, while the 10‑year yield climbed to about 4.93%. Markets now price in a very high probability of a rate hike in December.
Fed Governor Christopher Waller said in London that if core prices rose 0.3% or more, "a stronger policy move may be needed," and noted that a 50‑basis‑point rate hike should be considered at the Dec. 8–9 meeting.
"a stronger policy move may be needed," and "a 50‑basis‑point rate hike should be considered at the Fed's Dec. 8‑9 meeting."
Natixis North America’s chief U.S. economist Christopher Hodge said a third straight core reading of 0.3% is an “unacceptable pace for the Fed,” and that a 50‑basis‑point move is squarely on the table for December.
"unacceptable pace for the Fed," and "50bps is squarely on the table for the Fed in December."
Senior economist James McCann of Edward Jones said the data most likely seal the deal on a hike to close the year, but a quarter‑point increase remains the most plausible outcome given easing oil prices.
These developments underscore how the steady rise in core inflation could influence the Fed’s next policy decision and shape borrowing costs for consumers and businesses alike.
