In September, the Fed implemented its first interest rate hike in three years, increasing the policy rate by 25 basis points to a range of 3.75% to 4%.
Following this decision, while an interest rate hike is expected at the December meeting, which will be the last meeting of 2026, Wall Street Journal reporter Nick Timiraos, known as the Fed spokesperson, made statements yesterday regarding the inflation data released and the Fed’s December interest rate decision.
The Fed Faces Pressure for Bigger and Faster Interest Rate Hikes!
In the US yesterday, inflation data, which the Fed considers in its interest rate decisions, was released. According to the data, core inflation rose to 3.7% on an annualized basis over the past three months, increasing pressure on the Fed’s interest rate policy. While markets are almost certain of a rate hike in December, discussions are focused on a single 50 basis point increase or consecutive 25 basis point increases.
On FEDWatchtool, a 25 basis point increase is priced in at 86.5%, while a 50 basis point increase is priced in at 13.5%.
FED Spokesperson: “Pressure is mounting for larger and faster interest rate hikes.”
Wall Street Journal’s chief economics reporter, Nick Timiraos, stated in his report that Fed officials tried to suppress expectations of rapid and successive interest rate hikes in the markets throughout October, but the latest inflation data made this effort more difficult.
According to Timiraos, the inflation data increased concerns about renewed inflationary pressures, further strengthening market expectations that the Fed will raise interest rates at its December 8-9 meeting.
At this point, Timiraos stated that the Fed has two options: “To continue with its previously planned pace of two to three 25 basis point rate increases; or to move faster, deliberately slowing economic activity and curbing inflation with successive rate hikes or even a single 50 basis point increase.”
Timiraos said that recent statements by FED members indicate that the second option is more widely accepted.
Timiraos also added that whether the December meeting will see a single 50 basis point increase or two consecutive 25 basis point increases will be a crucial test of the Fed’s policy choices.
While the Fed made a significant divergence, Goldman Sachs raised its forecast for the Fed’s interest rate hike. At this point, Goldman Sachs predicts that the Fed will raise interest rates by 25 basis points twice, in December and March 2027. This shows that it has revised its previous forecast, which only predicted a rate hike in December of this year, and increased its interest rate forecast.
Hot Statements from a FED Member!
Speaking to Bloomberg, Chicago Fed President Austan Goolsbee expressed his concerns about inflation, noting that yesterday’s data indicated higher-than-expected inflation and emphasizing the need to bring inflationary pressures under control.
When asked about the possibility of a 50 basis point hike in December, Goolsbee said it wasn’t appropriate to rule out options before the meeting. “There’s the biggest table I’ve ever seen in that room, and all options are always on the table,” Goolsbee said.
Goolsbee also stressed the need to bring inflation back to the target level.
