Inflation is still hot! U.S. CPI increased 0.4% monthly, higher than expected, Fed Governor Waller supports raising interest rates to 2%

The U.S. Bureau of Labor Statistics (BLS) announced on the 10th that the Consumer Price Index (CPI) increased by 0.4% on a seasonally adjusted monthly basis in October, which was higher than the 0.3% increase expected by Dow Jones, indicating a new warning in the Federal Reserve's (Fed) efforts to curb inflation. Federal Reserve Governor Christopher Waller has threatened to consider supporting an expansion of interest rate hikes to 0.5 percentage points (two yards) at the December policy meeting if inflation data does not improve.

BLS data showed that excluding volatile food and energy prices, core CPI increased by 0.3% monthly, higher than the expected 0.2% increase. The unit does not publish an annual growth rate. Last year's U.S. government shutdown prevented sufficient data from October 2025 from being collected, making it impossible to make annual comparisons.

Karen Manna, fixed income investment strategist at Federated Hermes, said, "This is the most unwelcome report for the market; the higher inflation data raises new questions about whether the Fed has done enough to curb price pressures and heightens the risk of having to keep interest rates higher and longer."

After the report was released, the U.S. 10-year Treasury bond yield, which is crucial to mortgage, car loan and credit card interest rates, jumped more than 7 basis points to 4.938%, and U.S. stock futures fell. CME Group FedWatch data shows that the market believes that the chance of raising interest rates by 0.25 percentage points (one yard) in December is 85.3%, and the chance of raising interest rates by two yards is 14.7%.

Federal Reserve Board Governor Waller pointed out in a speech in London on the 10th that if the October inflation data is similar to the past two months, that is, the core inflation is about 0.3%, or higher, "then a stronger policy direction may be necessary; in this case, I think the December meeting should consider raising the policy interest rate by 50 basis points."

He added that in this case, a traditional rate hike of 0.25 percentage points would not be enough to win public confidence in the Fed to curb inflation. He said, "Raising interest rates by only 25 basis points may jeopardize our credibility, and I am not willing to take such a risk."

At its October policy meeting, the Federal Reserve voted 10 to 2 to keep its benchmark interest rate unchanged at a range of 3.75% to 4%.