Hotter US inflation makes a December Fed rate hike all but certain

US consumer prices rose 0.4% in October, more than the 0.3% economists had expected, the Bureau of Labor Statistics reported on Tuesday. That followed a 0.6% rise in September. Core prices, which leave out food and energy, rose 0.3%, against forecasts of 0.2%. No annual rate was published, because the 2025 government shutdown stopped the bureau from collecting enough prices in October last year. Traders now fully price in a quarter-point rise in interest rates when the Federal Reserve meets on December 8–9, and the odds of a half-point rise climbed from roughly zero to a little over 10%. The S&P 500 fell 0.38% to 7,520.93 and the Nasdaq lost 0.74%, with Nvidia down more than 5%.

The Fed held its benchmark rate at 3.75% to 4% in October. Before the report, Governor Christopher Waller said he was leaning toward a quarter-point increase in December and that a half-point move should be considered if core inflation came in around 0.3%, which it did. Dallas Fed President Lorie Logan said two more quarter-point increases are needed.

Why it matters

This is today’s highest-impact story because the Fed’s rate sets borrowing costs for mortgages, car loans, credit cards and businesses across the US, and moves capital and currencies around the world. A December rise is now the market’s firm expectation, and two large monthly price increases in a row suggest inflation is not fading. What is still uncertain is the size of the move: whether officials choose a quarter point or a half point, and how many more rises follow after that.

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