October US CPI came in hotter than forecast, lifting expectations for tighter Federal Reserve policy in December. Headline CPI rose 0.4% on the month versus a 0.3% consensus, and pricing now implies an 86% chance of a 25 bp move, alongside a 13% chance of a 50 bp increase. Energy prices climbed 0.7%, food rose 0.5% and shelter advanced 0.3%, while gasoline gained 1%. Shelter accounted for 30% of the monthly CPI rise, and the only categories posting declines were used cars and trucks, plus utility service charges.
CPI Data and Policy Expectations
October US CPI came in hotter than forecast, lifting expectations for tighter Federal Reserve policy in December. Headline CPI rose 0.4% on the month versus a 0.3% consensus, and pricing now implies an 86% chance of a 25 bp move, alongside a 13% chance of a 50 bp increase. Energy prices climbed 0.7%, food rose 0.5% and shelter advanced 0.3%, while gasoline gained 1%. Shelter accounted for 30% of the monthly CPI rise, and the only categories posting declines were used cars and trucks, plus utility service charges.
Market Reactions and Asset Performance
Markets are also weighing the next data points ahead of the FOMC meeting, including another NFP release, while US WTI crude has fallen $18 per barrel since the start of November and is at its lowest level since September. Risk assets sold off: Nasdaq futures indicated a 1% drop and S&P 500 futures fell 0.5%. US 2-year yields rose 12 bps, the USD index added 0.3% to trade back above 102.00, and gold slid 1.2%. In equities tied to AI, Nvidia fell 1.4%, Micron dropped 2%, with Microsoft and Meta also lower.
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