Fed Raises Possibility of 50bp Rate Hike in December

Senior officials from the U.S. Federal Reserve (Fed) have emphasized the need for an additional interest rate hike in December, mentioning the possibility of a 0.5 percentage point increase. The consumer price index (CPI) for October exceeded market expectations, increasing the outlook for a faster tightening pace by the Fed. Christopher Waller, a Fed governor, stated at a conference in London that even if the inflation rate slows in October, there is a possibility of supporting a 25bp hike at the December FOMC meeting. Waller diagnosed that while the U.S. economy is strong and the labor market is stable, the inflation rate exceeds the target of 2%. He stressed that if the core CPI rises by more than 0.3%, a 50bp hike should be considered. The October CPI rose by 0.4% compared to the previous month, exceeding the market expectation of 0.3%, while the core CPI rose by 0.3%, surpassing market forecasts. According to the CME FedWatch, the probability of a 25bp hike in December is 85.3%, while the probability of a 50bp hike is 14.7%. Lori Logan, president of the Dallas Federal Reserve Bank, also emphasized the need for further tightening, stating that at least two 25bp hikes are necessary. She mentioned the possibility of raising rates more quickly this winter. The Fed's hawkish statements and high inflation indicators have impacted the financial markets, leading to a decline in stock index futures and an increase in Treasury yields and the value of the dollar.

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