At the start of the year, the Fed was relatively optimistic. Tariff shocks were settling, prices seemed to be stabilizing, and economists were even forecasting that the central bank could finally start lowering interest rates. Fast forward to today, and the script has completely flipped.
For over five years, inflation has stubbornly sat above the Fed’s 2% target. This frustrating reality forced the central bank to abruptly change course in September, raising interest rates for the first time since 2023 with a 25 basis-point hike.
October’s inflation reading just threw more fuel on the fire, coming in hotter than expected at 0.4% (beating the 0.3% forecast). Core CPI, which strips out volatile food and energy prices, also beat expectations.
Now, as the final Federal Open Market Committee (FOMC) meeting looms on December 8th, the writing is on the wall. Nearly 88% of traders are bracing for another rate hike next month. Chicago Fed President Austan Goolsbee recently called the inflation readings “borderline disturbing,” while Fed Governor Christopher Waller hinted that a heavy-handed half point increase might even be on the table.
