Fed officials open door to a quicker round of rate hikes as inflation worsens

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The odds that the Federal Reserve may raise interest rates by half a percentage point next month jumped on Tuesday after US data showed prices rising faster than expected in…

WASHINGTON, Nov 10 (Reuters) - The odds that the Federal Reserve may raise interest rates by half a percentage point next month jumped on Tuesday after US data showed prices rising faster than expected in October and policymakers opened the door to a quicker pace of rate hikes.

The Consumer Price Index rose 0.4% on a monthly basis in October, down from the 0.6% registered in September as energy inflation receded. The core index excluding volatile food and energy prices, however, rose 0.3% for the third month in a row, evidence of persistent underlying inflation and price pressures spreading through the economy.

A few hours before the data was released, Fed Governor Christopher Waller said he planned to support a quarter-point increase at the Fed's December 8-9 meeting unless core CPI came in at 0.3% or more.

"In that case, I believe a 50-basis-point hike in the policy rate should be considered at the December meeting," he said at a conference in London hosted by King's Business School and the Money Macro and Finance Society.

Sticking with a smaller rate increase, Waller said, risked hurting the Fed's inflation-fighting credibility, given inflation was too high and appeared to be broadening.

Economists polled by Reuters 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.

By mid-morning, market pricing reflected about a 15% chance of a half-point rate hike before retreating to about 10% in the late afternoon. Over the course of the day, traders also piled into bets the Fed would keep to its usual quarter-point rate hikes but deliver three of them by mid-2027, rather than two as seen before the data.

Dallas Fed President Lorie Logan said in separate remarks at an energy conference that it "may be possible to move more rapidly" than the pace implied by the…

"The goal…

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