CPI exceeds expectations again, probability of a 50+ basis point rate hike rises from 0.5% to 11%

According to monitoring by PolyBeats, on November 10, the U.S. Bureau of Labor Statistics released the October Consumer Price Index: after seasonal adjustment, headline CPI rose 0.4% month-over-month, above the 0.3% expectation surveyed by Dow Jones and Reuters; core CPI, excluding food and energy, rose 0.3% month-over-month, above the expected 0.2%.

Just hours before the data release, Federal Reserve Governor Christopher Waller said in a speech in London that even if October inflation improved somewhat, he still leaned toward supporting a 25 basis point rate hike in December; but if core CPI came in around 0.3% or higher, as it had in the past two months, he believed the December meeting should consider a 50 basis point hike, and that raising rates by only 25 basis points would put the committee's credibility at risk.

On the prediction market Polymarket, the "Yes" probability for "Will the Fed raise rates by 50+ basis points after the December 2026 meeting?" stood at 11% (previously only 0.5%). Two accounts holding over $150k in "25 basis point hike" bought $4.9k of "50+ basis point hike."

arjennnnn bought $3.7k (15.2k shares, 0.78% share, average price 0.2422). This account has a 92.9% win rate across 28 markets traded in the Fed interest rate sector, with PnL +$94.7k and ROI +5.6%. This trade's input was 0.06x its average input in this sector.
ratehikes bought $1.2k (6.0k shares, 0.31% share, average price 0.1971). This account has a 33.3% win rate across 9 markets traded in the Fed interest rate sector, with PnL +$188.5k and ROI +28.8%. This trade's input was 0.02x its average input in this sector.

Historically, the Fed has not often raised rates by 50 basis points in one move. On May 4, 2022, after a 22-year gap—since May 2000—the Fed again raised rates by 50 basis points, lifting the target range from near zero to 0.75% to 1.00%. At that time, inflation was far higher than now, and Chair Powell also said subsequent meetings should put another 50 basis point hike on the table; after that, the committee raised rates by 75 basis points four consecutive times. On December 14 of the same year, the Fed again raised rates by 50 basis points, adjusting the target range to 4.25% to 4.50%, a slowdown from the consecutive 75 basis point pace. Powell said at the time that 50 basis points was still a historically large hike.

This time the backdrop is different: after going through a rate-cutting cycle from 2024 to 2025, the Fed only restarted hiking on September 17, 2026, raising the target range by 25 basis points to 3.75% to 4.00%, and then chose to hold steady on October 28. Rates are no longer near zero, and September headline CPI was 3.7% year-over-year, far below the roughly 8% level in 2022; this round of price pressure comes more from energy and freight costs pushed up by tariffs and the Middle East situation, rather than post-pandemic supply-demand imbalances.

If rates are raised by 50 basis points in December, it would be the second move after restarting hikes and would widen the step size, rather than scaling down from 75 basis points as in December 2022. Ole Hansen, head of commodity strategy at Saxo Bank, warned that crude oil prices have recently pulled back and inflation pressure may be easing, which is a risk to the judgment that rates will be raised by 50 basis points.