Hot US inflation lifts Fed rate-hike bets, hitting stocks and bonds

· Economy · United States

US consumer prices rose 0.4% from September to October, slightly above expectations, driven by shelter, food and energy costs, even as gas prices dipped during the month. The report, released after Republicans' midterm losses over high living costs, fuelled bets that the Federal Reserve will hike interest rates rather than cut them. Fed officials made hawkish remarks reinforcing expectations of a December increase, pushing the 10-year Treasury yield back toward 5% and sending stocks lower. The dollar posted its best day since September. A month earlier, CPI had also come in high, and traders who had rushed into bonds were left rattled as Treasuries reversed course.

Why it matters：Markets had priced rate cuts; a hike would raise borrowing costs worldwide and squeeze households and companies already strained by high prices.

Key points

  • October CPI rose 0.4% month on month, slightly above forecasts.
  • The 10-year Treasury yield climbed back toward 5%.
  • The dollar had its best day since September.

Sources (original reporting)

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