The consumer price index rose 0.4% in October from September, exceeding the Dow Jones consensus estimate of 0.3%. Comments from Federal Reserve Governor Christopher Waller then led some traders to price in a 50-basis-point rate increase in December. According to the CME Group’s FedWatch tool, the probability of a 50-basis-point hike has reached 11%, up from zero a week earlier, while the probability of a 25-basis-point increase stands at 88%. Markets reacted by selling stocks and bonds, with the 10-year Treasury yield rising nearly 10 basis points to 4.95%. Strategists warned that persistent inflation could force the Fed to raise rates more aggressively and keep monetary policy restrictive for longer, weighing on equities, the dollar and risk assets.
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