US consumer prices experienced their third consecutive month of above-target inflation, with the Consumer Price Index (CPI) rising 0.4% in October following a 0.6% increase in September - the largest monthly increase since April. According to the Labor Department's Bureau of Labor Statistics, this figure exceeded economists' Reuters polling forecast of 0.3% monthly growth. The BLS reports the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4% on a seasonally adjusted basis, with all items rising 0.35% and all items excluding food and energy up 0.30%. However, the Labor Department did not publish year-over-year inflation readings due to a lapse in appropriations preventing the collection of consumer price data in October 2025. Despite this missing comparison base, annual consumer inflation jumped 3.7% in September, remaining significantly above the Federal Reserve's 2% target. The US-Israeli war with Iran has contributed to higher oil prices, while import tariffs implemented by the Trump administration have also lifted living costs. Transportation services saw a price rise of 0.8%, compared to 0.6% in September, suggesting that escalating oil and fuel prices in the wholesale market are impacting core transportation sectors.
Federal Reserve Governor Christopher Waller has signaled a potential 50 basis point rate hike at the December 8-9 meeting, stating that a core reading of 0.3% for October would prompt him to consider a half-point hike. Speaking at a conference hosted by King's Business School and the Money Macro & Finance Society, Waller emphasized that "a stronger policy move may be needed" if core consumer prices rise 0.3% or more from September. He warned that sticking with a smaller rate increase risks hurting the Fed's inflation-fighting credibility given inflation that's too high and appears to be broadening out. With a quarter-point rate hike all but assured, market bets on a larger increase were rapidly building amid a broad bond market selloff, with odds of a 50 basis point hike jumping to nearly 15% at midmorning trading. This represents a significant shift from the previous market expectations, with economists having expected core monthly inflation to drop to 0.2% in October. Waller also indicated that he would not rule out a half-percentage-point increase if inflation continued to accelerate. Following Waller's comments, Treasury yields have pushed higher, with the 10Y and 2Y up 6bp and 13bp, respectively.
The October CPI data has reinforced expectations for Federal Reserve monetary policy tightening, with interest-rate futures now indicating approximately 99% probability of tighter policy after the hotter-than-expected inflation report. As per The Economic Times, economists said only a substantial sell-off on equity markets or widening credit spreads would prevent the Fed from tightening monetary policy next month. The Federal Reserve left its benchmark overnight interest rate in the 3.75%-4.00% range last month and is expected to raise rates further. The persistence of core inflation could also bring a larger rate increase into consideration, with Federal Reserve Governor Christopher Waller previously stating the central bank may need to consider a half-percentage-point increase if core CPI rises by 0.3% or more. The October reading met that threshold, with underlying inflation trend showing core CPI increased at an annualised rate of 3.7% over the three months through October and 2.7% over the six-month period. Recent comments from Federal Reserve officials have reinforced expectations for continued monetary policy tightening, with San Francisco Fed President Mary Daly explicitly stating that controlling prices must be the top priority. Traders are pricing in an almost 99% chance of a hike in December, according to the CME FedWatch tool, as markets now fully contemplate a bit more tightening than previously anticipated. According to Pacific Investment Management Co. economist Tiffany Wilding, "Clearly, the 50 basis point hike is on the table for discussion."
US stock indices declined sharply on Tuesday, November 10, after hotter-than-expected October inflation data heightened fears that the Federal Reserve could raise interest rates yet again in December. According to preliminary data, the S&P 500 lost 28.46 points, or 0.38%, to end at 7,521.48 points, while the Nasdaq Composite lost 185.90 points, or 0.74%, to 25,067.23. The Dow Jones Industrial Average fell 161.95 points, or 0.31%, to 52,227.80. The 2-year US Treasury yield surged nearly 20 basis points and was poised for its biggest daily gain since April 9, 2025, after US President Donald Trump launched his sweeping global tariffs. The CPI data and Waller's comments drove a powerful selloff in the US Treasury market, with the yield on 2-year notes - a proxy for Fed policy expectations - rising by the most since early April 2025. Nasdaq-100 futures fell 1.2% and the two-year Treasury yield jumped more than 15 basis points to almost 4.7% in immediate market reaction to the data. Technology shares led the selling, with chipmakers among the hardest hit - Micron Technology and Marvell Technology fell around 3% each, while Intel declined 2% and Qualcomm lost more than 1%. Nvidia shares dropped 6% and has tumbled about 10% over the past two sessions following reports involving CEO Jensen Huang, who admitted over the weekend to having an affair with an alleged Chinese spy, with The Information reporting that Jensen Huang's affair with Chinese businesswoman Alice Huang facilitated the shipment of at least $7.5 billion worth of the company's chips through Chinese firms. The weakness in technology stocks came even as artificial intelligence company Anthropic announced it was seeking to raise up to $64.4 billion through its upcoming IPO, with the company targeting a fully diluted valuation of $1.4 trillion.
Brent crude futures fell over 3.2%, dipping below the $90-a-barrel mark for the first time since late August, at $89.65 a barrel as investors pinned their hopes on possible peace talks between the US and Iran. US West Texas Intermediate futures fell $2.33, or 2.68%, to $84.52. The decline in oil prices helped ease some of the inflation concerns that have been on investors' radar since the US-Israeli war with Iran erupted at the end of February. The pan-European STOXX 600 was within 1% of its all-time high as lower oil prices helped ease some of the inflation concerns. South Korea's KOSPI rose 4.4%, while Japan's Nikkei gained 2.9%. MSCI's broadest index of Asia-Pacific shares pushed 2% higher, moving away from the seven-month low it hit last week. However, if the Middle East de-escalation continues, it should provide a meaningful drag on November headline inflation, though we won't get that data until the day after the December FOMC meeting.
