Fed Weighs 0.5-Percentage-Point Rate Hike Amid Rising US Inflation

The US Consumer Price Index for October came in higher than market expectations. The October CPI rose 0.4% from the previous month. Core CPI, which excludes volatile energy and food prices, also climbed 0.3%, with both figures exceeding market forecasts by 0.1 percentage points.

The likelihood of a rate hike has grown even further, following strong figures from the previously released nonfarm payrolls report. According to the CME Group's FedWatch, the probability of a benchmark rate increase next month has reached 100%. Chris Brigati, Chief Investment Officer at SWBC, analyzed: "The Fed appears set to raise rates in December," adding that "it now seems virtually a foregone conclusion."

Voices favoring a hike are also growing within the Fed itself. Senior Fed officials have mentioned the possibility of a 'big step' increase of 0.5 percentage points at once. Fed Governor Christopher Waller, speaking at an event in the UK, raised the possibility of a 0.5-percentage-point hike if inflation rises significantly more than expected. Lorie Logan, President of the Dallas Fed, said, "Given the current economic outlook, it is clear that the benchmark rate needs to be raised at least two more times, by 0.25 percentage points each."

The Fed will hold a two-day monetary policy meeting starting on the 8th of next month to decide whether to raise the benchmark rate, and by how much.