Hot CPI Report Could Get Fed to Move More Aggressively Than Wall Street is Expecting

Traders had priced in roughly an 80% chance of a December hike before today's Consumer Price Index (CPI) report.

Fed Governor Chris Waller already favors a quarter-point hike in December, even if inflation cooled. 

He also said a half-point hike “should be considered” if core CPI came in around 0.3% or higher. Well, we hit that - and then some.

What the report showed

Headline CPI cooled from September’s 0.6% but still beat forecasts. Core CPI matched September’s 0.3% and also came in above forecasts. 

Energy led the way. Heating oil jumped 2.0%, gasoline rose 1.0% and electricity rose 0.9%. Natural gas fell 0.8%.

Everyday costs kept climbing. Transport services rose 0.8%, restaurants and medicines rose 0.5% each and groceries rose 0.4%.

Housing, the biggest weight in the index, rose 0.3%. Doctors and hospitals also rose 0.3%.

Used cars were the biggest drop, falling 1.2%. New cars rose 0.2% and clothing 0.1%.

With a December Fed hike widely expected, the next question is how big it is.