Economy

US Core Inflation Meets Waller's Half-Point Hike Bar

October's core CPI rose at the pace Waller tied to a bigger December hike, while BLS could not publish an annual rate. Futures moved within hours.

by Graham Ellery3 min read

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US consumer prices rose 0.4% in October, the Bureau of Labor Statistics said in its Consumer Price Index release on Tuesday morning, November 10. That followed a 0.6% gain in September. Core prices, which exclude food and energy, rose 0.3% for a third straight month, matching the August and September readings.

Both numbers came in above forecast. Economists polled by Reuters had expected 0.3% for the headline index and 0.2% for core.

One figure you would normally see is missing. BLS said it gathered no survey prices for October 2025 while federal funding had lapsed, so it published no 12-month change for all items or for core this month. The last official annual rates remain September's 3.7% headline and 2.6% core, from the September release. By our arithmetic, three months of 0.3% core gains compound to an annualized pace near 3.7%, well above that 2.6%.

Shelter rose 0.3% and accounted for more than 30% of the monthly increase, while energy rose 0.7% and food 0.5%, by the same BLS release.

Waller Drew the Line Hours Before the Print

Fed Governor Christopher Waller set out his test in London only hours before the data, in a speech dated November 10. If October looked like the past two months, with core near 0.3% or higher, he said:

In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting. Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.

Core landed exactly on his line. His words were "should be considered", so the speech puts a half point up for debate without promising his vote for it, and he said he would back at least a quarter point even if October had improved.

Futures repriced the December decision quickly. CME's FedWatch tool, in data stamped 11:10 a.m. CT on November 10, put 12.5% on a half-point hike and left no weight on a hold. The same FedWatch reading at 11:10 a.m. CT gave the quarter point 87.5%. In a report filed at 9:27 a.m. ET, Reuters said the half-point odds had stood at 0% before the data.

So what did the bond and currency markets make of it? Short-term Treasury yields rose. Reuters reported at 9:51 a.m. ET on November 10 that the 2-year yield was "rising by the most since early April 2025". The ICE dollar index was up 0.4% at 9:22 a.m. ET, according to the Wall Street Journal's market report.

For your metals, the same Reuters gold report put spot gold down 2.1% at 9:27 a.m. ET on November 10. If the November 6 jobs data in US Payrolls Rise as December Fed Hike Bets Grow made a hike likely, the October print put its size up for debate.

We are wrong about a larger step if FedWatch's half-point odds fall back toward zero before the meeting. October's report is the last CPI the committee sees before its December 8-9 meeting, because BLS publishes November's CPI on December 10, the day after the decision.

Seek the truth and be prepared,

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