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Investors boost odds of half-point Fed hike as core CPI rise meets Waller’s bar

By Thomson Reuters Nov 10, 2026 | 8:52 AM

By Howard Schneider

WASHINGTON, Nov 10 (Reuters) – Odds the US Federal Reserve may raise interest rates half a percentage point at its December meeting jumped on Tuesday after new data showed prices rising faster than expected and clearing the bar set by one key ​policymaker for considering a quicker pace of rate hikes.

The Consumer Price Index rose 0.4% ‌month over month in October, a drop from the 0.6% in September as energy inflation receded, but the index excluding volatile food and energy prices rose 0.3% for the third month in a row, evidence of persistent “core” inflation that also showed signs of spreading through the economy.

In comments overnight in London, Fed Governor Christopher Waller said that a core ‌reading ​of 0.3% for October would prompt him to consider a half ⁠point hike at the Fed’s December ⁠8-9 meeting. With a quarter-point rate hike all but assured, market bets on a larger increase were rapidly building amid a broad bond market selloff and at midmorning were close to 15%.

If core consumer prices rise 0.3% or more from September, “a stronger policy move may be needed,” ​Waller said at a conference hosted by King’s Business School and the Money Macro & Finance Society. “In that case, I believe a 50 basis point hike in the policy rate should be considered at ⁠the December meeting.”

Sticking with a smaller rate increase, Waller ⁠said, risks hurting the Fed’s inflation-fighting credibility given inflation that’s too high and ​appears to be broadening out. Economists had expected core monthly inflation to drop to 0.2% in October.

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.

Dallas Fed President Lorie Logan and Fed Vice Chair for Supervision Michelle Bowman speak later on Tuesday.

The October inflation data follow midterm elections that revolved around cost-of-living issues and ended in a ⁠dramatic rebuke of President Donald Trump and the Republican party.

The October data showed unexpected jumps in auto insurance, public transportation and medical services that could land particularly hard on middle- and lower-income households that policymakers ⁠see as the weak link in ‌an overall solid consumer spending picture.

“There was not much in today’s report ⁠to assuage concerns about ongoing inflation risks or the fact that ​the Fed ‌will need to hike rates further to tamp down price pressures,” Omair ​Sharif, president of ⁠Inflation Insights, wrote after the release of the latest consumer price data.

He said the consumer price data put the core Personal Consumption Expenditures price index on track to rise 0.34% in October, a more than 4% annualized pace and an increase from the month before. The Fed sets its 2% inflation target using the PCE index, but considers the core figure a better measure of inflation trends.

(Reporting by Howard Schneider; ​Editing by Andrea Ricci)