U.S. Inflation Tuesday: Why the Fed Might Raise Rates in December

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The September figure has left its mark. Prices had jumped 0.6% in one month and 3.7% over one year, with gasoline up 9.1% which accounted for more than half of the total. The war in Iran and a barrel around 100 dollars happened there. Economists surveyed by Bloomberg expect 0.3% over one month for October and 0.2% for the underlying index, the one which excludes energy and food.

A technical detail will complicate the reading. Several analysts warn that no one-year variation will be published this month, because October 2025 prices were never recorded during the shutdown. The Bureau of Labor Statistics does not specify this on its calendar. If you see “3.9% over one year” on Tuesday, that will be a private estimate.

Oil is going the other way this time. Brent lost around 15% last week to end around $98.

We quickly forget it. The Fed raised rates by a quarter point on September 16, its first increase in more than three years. She left them between 3.75% and 4% on October 28, but two committee members voted for a further increase. “We will ensure price stability. No ifs, no ands, no buts,” declared its president Kevin Warsh at a press conference.

Employment has surprised since then. The American economy created 165,000 jobs in October when the consensus expected 59,000. The CME's FedWatch tool now gives a 78.5% chance of an increase at the meeting on December 8 and 9. A CPI above expectations would increase this probability, a wise figure would leave a way out.

The other novelty is political. Democrats have at least 54 seats in the Senate after the November 3 elections. They will be able to refuse to confirm Donald Trump's nominees to the board of governors starting in January. Bloomberg notes that no seat is vacant today and that Jerome Powell's term as governor runs until January 2028. The Wall Street Journal sees this as the largest brake on the president's ambitions for the central bank.

The precedent is not flattering for Bitcoin. The September CPI publication caused it to fall by around 1.2% in a few minutes on October 14, from $83,800 to $82,800. Rising rates make cash and more profitable, and therefore assets without yield less attractive. The US is already at 4.87%.

Machine-translated from French