Fed officials signal possible half-point rate hike as October inflation beats forecasts

Federal Reserve officials signaled Tuesday they may raise interest rates by half a percentage point next month after October inflation data came in hotter than expected, prompting markets to increase bets on a larger hike. Fed Governor Christopher Waller said a 0.3% monthly rise in core consumer prices would warrant considering a 50-basis-point increase at the December 8-9 meeting, warning that a smaller move risks damaging the central bank's inflation-fighting credibility. Dallas Fed President Lorie Logan also said it "may be possible to move more rapidly" than the quarter-point hike approved in September. The core CPI, excluding food and energy, rose 0.3% for a third straight month, exceeding economist forecasts of 0.2%, with unexpected jumps in auto insurance, public transportation, and medical services. Treasury yields surged, with 2-year note yields posting their biggest rise since April 2025, while Kansas City Fed President Jeffrey Schmid noted inflation remains "top of mind" for policymakers.