Probability of 50-basis-point Fed rate hike rises to 14.5%
Following stronger-than-expected U.S. inflation data for October, the probability of a 50-basis-point interest rate hike at the Federal Reserve's (Fed) December meeting increased to 14.5%.
Persistent inflationary pressures have strengthened expectations of more aggressive monetary tightening, pushing U.S. Treasury yields and the dollar higher. Although a 25-basis-point rate hike remains the baseline market scenario, investors are increasingly pricing in the possibility of a larger increase.
Fed officials have expressed differing views on the pace of interest rate hikes. Federal Reserve Governor Christopher Waller stated that a 50-basis-point increase should be considered if monthly core inflation reaches 0.3%, while other officials favor a more gradual approach to monetary tightening. Economic data released ahead of the Fed's December 8–9 meeting will play a crucial role in shaping interest rate expectations. The possibility of a more aggressive rate hike is putting pressure on gold and global equity markets in particular.