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New inflation numbers for October have come in hotter than expected, raising concerns about the Federal Reserve's next steps. The Consumer Price Index (CPI) rose by 0.4% for the month, while the core CPI, which excludes volatile food and energy prices, increased by 0.3%, according to the Bureau of Labor Statistics.
The unexpected rise in inflation has prompted Federal Reserve officials to consider more aggressive interest rate hikes. Christopher Waller, a Fed Governor, suggested that a half-percentage-point rate increase might be necessary in December. Lorie Logan, President of the Dallas Fed, also supported at least two additional quarter-point rate increases, as reported by Bloomberg.
The inflation report has affected financial markets, with stocks falling and Treasury yields rising. Karen Manna, a fixed income investment strategist at Federated Hermes, noted, "This was the report the market could least afford to see," highlighting concerns about whether the Fed has done enough to control price pressures.
The Wall Street Journal reported that consumer prices rose by 0.4% in October, or 0.3% when excluding food and energy. The report comes at a critical time for the Federal Reserve as it considers its next interest-rate move.
Despite recent declines in gasoline prices, the energy index rose by 0.7%, and food costs increased by 0.5%. The inflation data has increased the likelihood of a rate hike at the Fed's next meeting on December 8-9.