Hotter US Inflation Strengthens The Case For A December Fed Hike

By James Knightley of ING Think

Economic and Financial Analysis • Nov 10, 2026 at 9:30 AM EST

Hotter-than-expected US inflation data strengthens the case for a December rate hike as headline CPI rose 0.4% in October.

US consumer price inflation came in hotter than expected, with headline CPI rising 0.4% month-on-month and core CPI up 0.3%, both a tenth of a percentage point above expectations. No year-on-year rates were published because the government shutdown meant no price data was collected in October 2025

Used vehicle prices fell sharply in October.

There was some softness in the details of today’s US CPI report, with new vehicle prices rising just 0.2% month-on-month and used vehicle prices falling 1.2%. But other components were hotter: medical care commodities rose 0.5%, transportation services jumped 0.8%, while shelter, the largest component of the CPI basket, increased 0.3%. Overall, headline CPI rose 0.4% and core 0.3%, both 0.1ppt above consensus.

Following on from Fed Governor Chris Waller's comments earlier today that he backs a 25bp hike in December and could even opt for a 50bp hike, Treasury yields have pushed higher, with the 10Y and 2Y up 6bp and 13bp, respectively. Markets are now fully pricing in a 25bp hike at the December Fed meeting, in line with our own forecast, versus 20bp from before Waller's comments.

Nonetheless, hopes of a Middle East de-escalation are pulling energy costs lower, with retail gasoline prices now below $4/gallon for the first time since mid-July. If that continues, it should provide a meaningful drag on November headline inflation, but we won't get that data until the day after the December FOMC meeting.

The Fed may get a sneak peek of that data, giving it the confidence to only raise rates by 25bp. We are not forecasting any further hikes in 2027 as interest rate-sensitive sectors cool further, with housing costs and lower energy prices amid weak wage growth dampening price pressures in the economy.

US Core CPI

Source: Macrobond

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