The Fed looks set to raise rates in December after all

A hot October inflation report has pushed traders' odds of a quarter-point December hike close to 90%.

In one line: The Fed raises the top of its rate range by a quarter point, to 4.25%, at its December meeting, an outcome 89% still underrates.

Strong October inflation figures led Federal Reserve officials to voice concern over stubborn prices and to leave open a half-point rate rise, Reuters reported through devdiscourse on 12 Nov. The same report said the data drove short-dated Treasury yields sharply higher. Thestreet reported the same day that Bank of America raised its own warning on Fed rates after the surprise. The turn began earlier: on 28 October the Fed held its range at 3.75% to 4%, but two officials favoured a hike, coinpedia reported.

Traders have followed. On Polymarket the contract on a quarter-point rise (25 basis points, each a hundredth of a percentage point) trades at 89%, up 3 points in the last 24 hours. Over seven days it rose 22 points from 66% on 6 Nov, touching 91% on 12 Nov. In the same event a rise of half a point or more sits at 10%, no change at 2% and every cut at 0%. Kalshi prices the same quarter-point hike at 85%, so two separate books agree.

The reporting and the price point the same way, and the open question is size. A week ago this digest called a December hold, then priced at 32%. The October inflation report removed the case for it, and this digest drops that call. Officials left a half point open rather than arguing for it, and the October split was over whether to hike at all, not by how much. The 10% on the larger move fits that.

The Fed raises the top of its range by a quarter point, to 4.25%, at its December meeting, and 89% still underrates that outcome. The best case against is a second hot inflation report before the meeting, which could carry the committee to half a point and make the 10% price too low. The call is wrong if the December decision, which settles the contract on 9 December, leaves the upper bound anywhere but 4.25%. A hike would keep long Treasuries (TLT, down 1.28% on 12 Nov) and homebuilders (ITB, down 2.05%) under pressure, with the New York Times reporting home sales at a 16-year low and the 30-year mortgage rate at 7.11%.

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