CME FedWatch Odds Jump Near 90 Percent for December Hike as 50-Basis-Point Risk Appears
Headline Consumer Price Index figures released earlier this week rose 0.4 percent month-over-month in October against a 0.3 percent forecast, while core prices climbed 0.3 percent compared with 0.2 percent expected. Two-year Treasury yields surged to roughly 4.86 percent on the sharpest two-day climb in over three and a half years.
According to InvestingLive, PrefBlog, and Global Banking & Finance Review, CME FedWatch probabilities for a 25-basis-point Federal Reserve rate hike on December 9 climbed to between 85 and 90 percent, with latest market pricing near 88.8 percent. Before the October inflation report, odds of a larger 50-basis-point increase stood near zero, but have since risen to roughly 10 to 15 percent. Traders awaited October Producer Price Index data due at 8:30 a.m. ET Friday, with economists expecting monthly PPI to slow from 1.3 percent in September to 0.4 percent while annual PPI reaches 6.6 percent. The Federal Reserve previously raised rates in September and held its benchmark target range at 3.75 percent to 4.00 percent on October 28, when two officials dissented in favor of another immediate hike. Due to an earlier federal funding lapse, the Bureau of Labor Statistics did not publish 12-month CPI rates alongside Tuesday's monthly figures, leaving analysts reliant on sequential monthly trends.
Cleveland Fed President Beth Hammack said Thursday she does not believe the central bank needs to shift to more aggressive rate hikes, while San Francisco Fed President Mary Daly said further rate increases will likely be needed without signaling urgency. By contrast, Fed Governor Christopher Waller has said he favors a quarter-point hike in December and could back a half-point step if inflation runs hotter. Attention turned Friday to scheduled remarks by New York Federal Reserve President John Williams.
