(Nov 11) : Wall Street doubled down on wagers the Federal Reserve will need to lift rates more aggressively, with stocks and bonds falling as inflation worries spurred fresh warnings from officials.

A strong consumer price index fueled bets on a quarter-point December Fed hike, with traders projecting some chance of a larger move. Treasury two-year yields jumped the most since April 2025. The S&P 500 halted back-to-back gains. The dollar rose. In late hours, CoreWeave Inc. gave a solid outlook, easing fears about the debt-laden business suffering a slowdown.

Fed Governor Christopher Waller said a half-point December hike may be needed. That was followed by remarks from Dallas Fed President Lorie Logan, who backed at least two more quarter-point increases, adding those may be necessary at a quicker pace than officials have moved.

“The Fed could push for a more-aggressive tightening cycle with CPI continuing to print strong,” said Lindsay Rosner at Goldman Sachs Asset Management. “A December hike is our firm base case despite wider AI jitters, and stubborn inflation means we cannot rule out further hikes in 2027.”

Even if the Fed decides to lift rates by a quarter point at its upcoming meeting, the risk of stickier near-term inflation argues for hiking at both the December and January meetings with the risk of another in March, according to Tiffany Wilding at Pacific Investment Management Co.

“A Fed policy rate hike in December appears quite likely and the question is more about whether it will be a quarter point hike or a half point,” said Rick Rieder at BlackRock. 

While financial conditions have been adjusted by markets in rapid fashion, inflation still stayed very high on the minds of openly communicative Fed officials over the past couple of weeks, he added.

“With the near-term trend looking worse, a December Fed hike is a given unless financial conditions tighten materially further or markets are very volatile on the eve of the meeting,” noted Krishna Guha at Evercore. “The larger question is why inflation has come in hotter in recent months, and what this means for policy in 2027.”

A December hike looks locked in, but an outsized move should require evidence that inflation is accelerating decisively, expectations are becoming unanchored or the economy is overheating, said Seema Shah at Principal Asset Management. 

“We are not there yet,” Shah noted.

uploaded by Isabelle Francis