A December interest rate rise by the Federal Reserve now looks all but certain, according to market pricing after Tuesday’s hotter-than-expected inflation report, with traders even pricing in a chance of a half-point move.
The print that changed the odds
The Bureau of Labor Statistics said the Consumer Price Index climbed 0.4% in October, after rising 0.6% in September. Economists polled by Reuters had forecast a 0.3% rise. Core inflation, which excludes food and energy, rose 0.3% for a third consecutive month, against a forecast of 0.2%.
The core reading landed exactly on the line Federal Reserve Governor Christopher Waller drew a few hours earlier. Waller said in London that a 50 basis point hike should be considered in December if October core CPI came in around 0.3% or higher.
No annual rate this time
The Bureau of Labor Statistics did not publish the annual inflation rate for October because it collected no prices in October 2025, when a lapse in government funding halted its survey work. The last official annual reading, for September, was 3.7% headline and 2.6% core. Anyone quoting an October year-over-year inflation rate is quoting a number the bureau never published.
The awkward timing
The timing is awkward for the Fed: the next inflation report, covering November, is not scheduled until December 10, the day after the December 8-9 meeting ends, leaving the October figures as the final inflation data officials will see before they vote. Shelter rose 0.3% and accounted for over 30% of the monthly increase, while food rose 0.5% and energy rose 0.7%. Markets took the message quickly: the hot print, landing exactly on Waller’s threshold, lifted the odds of a December hike to near certainty and put a 50 basis point move firmly in play, according to the day’s market coverage.
Related reading: US CPI October Inflation Report November 10 Preview · Fed Waller: December Rate Hike 50 Basis Points
