Key Notes
- CME FedWatch’s November 10 snapshot at 14:45 UTC put a half-point December hike at 14.7%, versus 0% a day earlier.
- A quarter-point increase remained the main outcome at 85.3%, with no change priced at 0%.
- Waller had said before the CPI release that another core reading around 0.3% or higher would warrant considering a 50-basis-point increase.
Traders began assigning a meaningful probability to a half-percentage-point Federal Reserve rate increase in December after October inflation exceeded forecasts, adding a larger move to a policy debate that had centered on a quarter-point rise.
A CME FedWatch snapshot dated November 10 at 14:45 UTC put the probability of a 50-basis-point increase at 14.7%, compared with 0% in its previous-day reading. A quarter-point increase remained the main outcome at 85.3%.
Quarter-Point Increase Remains the Main Bet
The shift followed the October CPI report, which showed headline consumer prices rising 0.4% over the month against a 0.3% forecast. Core prices, excluding food and energy, increased 0.3%, above the 0.2% estimate and matching their pace in August and September.
With the Fed’s current target range at 3.75%-4%, a quarter-point move would lift it to 4%-4.25%. A half-point increase would take it to 4.25%-4.5%. FedWatch’s displayed probability of no change fell to 0% from 16% a day earlier.
These are futures-implied probabilities at the stated time. The larger increase was still the minority outcome, and the pricing can change as officials respond to the data.
Waller’s Inflation Test Is Met
Governor Christopher Waller had outlined that possibility before the release. In a London speech on November 10, he said he leaned toward a quarter-point December increase even if inflation improved. Another core CPI reading around 0.3% or higher would warrant considering a larger step.
In that case, Waller said, “a 50 basis point hike in the policy rate should be considered at the December meeting.” October’s published figure met the threshold he had described. His remarks represented his own position, rather than an agreed committee decision.
Waller supported the Fed’s October hold. The committee next meets on December 8-9. Governor Lisa Cook and Cleveland Fed President Beth Hammack had already favored a quarter-point increase in October.
The Debate Extends Into 2027
The Wall Street Journal’s Nick Timiraos framed the inflation report as a test of the Fed’s strategy of spacing out increases. In a separate public comment, he said the figures were likely to convince officials they would need to tighten more next year.
Bloomingbit, citing market-news account Walter Bloomberg, also reported that the asset-management arm of Goldman Sachs (NYSE: GS) saw persistent inflation potentially extending hikes into 2027. The report identified a December increase as the base case of its multi-sector fixed income head Lindsay Rosner. That is a conditional investment view from the asset-management unit.
The stronger jobs report has given officials room to focus on prices without an immediate rise in unemployment. For borrowers, the size of December’s move is only part of the cost: further increases in 2027 would prolong the pressure on floating-rate debt and refinancing.
