The inflation report today came in hotter than expected, with the Consumer Price Index rising 0.4% in October from a month earlier. Traders quickly leaned harder toward a December Federal Reserve move, and the shift was visible in rate bets and Treasury yields.
Economists had expected a 0.3% gain. September CPI had risen 0.6%, so October cooled from that pace even as it still overshot the forecast. Core inflation also rose 0.3% in October, above the 0.2% expectation.
Chris Waller in London
Chris Waller added to the pressure on the December meeting from London. He said, “Inflation is too high … this means that even if, as I expect, the monthly rate of inflation improves in October, I am leaning toward supporting an increase in our policy rate of 25 basis points at the FOMC's December meeting,” and added, “In that case, I believe a 50-basis point hike in the policy rate should be considered at the December meeting.”
He also said, “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.” That leaves traders weighing a larger move than they had before the report, not just the standard quarter-point step.
Treasury yields reprice fast
Markets moved immediately after the release. Traders saw an 84% chance of a 25 basis point hike in December, while bets on a 50 basis point move rose from 0% yesterday to 15% today. The 5-year Treasury yield jumped 10 basis points to 4.75%, the 10-year Treasury yield rose 7 basis points to 4.93%, and the 30-year Treasury yield increased 3 basis points to 5.29%.
US stock futures traded mixed on Tuesday morning after the report. That reaction fit the larger reset: a hotter monthly CPI reading pushes short-term rate expectations higher, and the market response showed that December pricing moved first.
The Bureau of Labor Statistics data gap
The October report also carried a built-in limitation. The Bureau of Labor Statistics was unable to publish full October 2025 data because of the government shutdown last year, and the report did not include annual inflation figures because that shutdown limited the data available.
For readers watching rates, the important point is the next policy meeting. The October CPI gave traders a hotter monthly print, a softer pace than September, and enough fuel to move the odds toward a more aggressive Federal Reserve decision in December.
