Overview
- October consumer prices rose 0.4% month over month and core CPI rose 0.3%, a third consecutive hotter-than-expected print that has pushed markets to price a Fed rate hike in December.
- Fed officials are split over the next move with Christopher Waller saying a 50 basis point increase should be on the table and other policymakers favoring a run of 25 basis point steps.
- Financial markets and major banks have re-priced policy paths, with futures showing a December hike as nearly certain and Goldman Sachs adding another 25bp increase in March 2027 and delaying the first cut.
- Other central banks are already tightening: the Bank of Canada raised its policy rate to 2.5% at its Oct. 28 decision and the Bank of England recently lifted Bank Rate to 4%, both warning further increases may be needed.
- Economists warn that as price rises spread into food, shelter, goods and services the risk grows that inflation becomes embedded, which would raise borrowing costs for households and could slow growth if policy is tightened more aggressively.