Fed policy: December hike viewed as a done deal, with 50bps risk – TD Securities

A December Fed rate hike looks virtually certain to TD Securities’ macro research team after US CPI surprised on the upside and Core PCE projections remained firm. While a 25bp increase remains their preferred outcome, they see a growing likelihood of another hike in early 2027. A 50bp “catch-up” increase in December is also a clear possibility in their assessment, pending PPI data and further commentary from Fed officials.

Will the Fed Opt for a 25bp or 50bp Hike?

"The strong upside surprise in today's CPI makes a December hike all but certain, in our view."

"After Waller's speech this morning, the debate has now shifted to whether the FOMC will go 25 or 50bps."

"We still favor a 25bp hike with a rising risk of another hike in January."

"We believe that today's data certainly seals a Dec rate hike by the Fed."

"However, following Governor Waller's remarks pre-CPI, the discussion will now center around the need for implementing a "catch-up" 50bps rate hike in December, or whether to maintain course with a 25bps rate increase and provide strong guidance toward a potential January follow-through."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)