Inflation came in hotter than expected in October as energy costs continued to rise amid the Iran war – teeing up the Federal Reserve to hike interest rates next month.
The Consumer Price Index rose 0.4% over the month – slowing from a 0.6% monthly pace in September but hotter than estimates of a 0.3% rise, the Bureau of Labor Statistics said Tuesday. The 12-month inflation rate was not released due to the government shutdown last fall, which halted data collection.
On a core basis, which excludes volatile food and energy prices, the CPI rose 0.3% in October – the same monthly pace as September and August, and higher than estimates of a 0.2% increase.
Traders are betting on near-certain odds of a quarter-point rate hike at the Fed’s Dec. 9 meeting, with a more than 98% chance rates will be raised to the 4% to 4.25% range, according to CME FedWatch.
Speaking in London just hours before the CPI report, Fed Governor Christopher Waller said he’s leaning toward a quarter-point hike at next month’s meeting. He said if the data swayed him at all, it would be toward a larger hike – not a hold.
If core inflation rose 0.3% or more – as the data showed it did in October – the Fed should consider a half-point hike, he added.
Recent jobs data showed hiring was surprisingly strong in October and the unemployment rate fell, adding to the case for a rate hike as the Fed can remain squarely focused on inflation.
This is a developing story. Please check back for updates.
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