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A Larger-Than-Normal Fed Rate Hike in December Now Looks More Likely. Here's Why.
The Motley Fool • • business
Key Points:
- The Federal Reserve typically raises interest rates gradually by a quarter-point, but recent inflation data suggests a possible larger increase in December.
- The October Consumer Price Index (CPI) showed inflation rising 0.4% month-over-month, exceeding expectations and driven by higher energy and housing costs.
- Fed Governor Christopher Waller indicated that a 50-basis-point hike might be warranted if core CPI remains at or above 0.3%, which it did in October.
- Fed Chair Kevin Warsh has not publicly supported a larger hike but may be persuaded due to strong economic and labor market conditions.
- Futures markets currently favor a quarter-point hike, but this could shift toward a half-point increase depending on upcoming inflation data, particularly the Personal Consumption Expenditures price index on November 25.
