BofA: Hot CPI All but Locks In a December Fed Hike, Opens Door to 50bp

After Tuesday's inflation report, Bank of America told clients the data "all but lock in" a Fed rate hike in December and, following hawkish comments from Governor Christopher Waller, "open the door" to a 50-basis-point move. The bank itself still forecasts 25bp.

Details

US consumer prices rose 0.4% in October, with core up 0.3%; CNBC reports the consensus for the headline was 0.3%. In the note, as relayed by Investing.com, BofA says goods and services inflation are both "moving in the wrong direction" and that the Fed "seems to be falling behind the curve." It also flags a rising risk of the next hike coming in January rather than March.

Earlier on November 10, Waller told a conference in London he leans toward a 25bp increase in December, but that if core CPI came in around 0.3% or higher, "a 50 basis point hike in the policy rate should be considered" at the December meeting. The print landed at that level.

Markets moved only partly. Per CNBC, CME FedWatch put the odds of a 50bp hike at 11%, up from 0% a week earlier, and a 25bp hike at 88%, up from 77%. The 10-year Treasury yield rose nearly 10bp to 4.95%.

What it means for the market

Tighter policy weighs on bitcoin through yields and the dollar. In our data, the US Treasury 10-year closed at 4.98% on November 10 (+10bp) and the 2-year at 4.73% (+17bp), while the DXY dollar index gained about 0.3%. At 7:35 ET BTC traded near $73,900, down 0.4% on the day and 8% on the week.

The next FOMC meeting is December 8⁠–⁠9; the last one, on October 28, held rates with two dissents in favor of a hike. For the live price, see the daily brief. Not investment advice.