A growing number of Wall Street analysts suggest the Federal Reserve will likely accelerate its interest rate hikes to combat persistent monetary policymakers will implement a 0.25 percentage point increase to the benchmark rate during each of the central bank’s upcoming meetings in December, January, and March. Similarly, analysts at TD Securities have revised their outlook, now projecting three consecutive quarter-point hikes rather than two, noting that recent inflation data indicates price pressures are becoming more widespread throughout the U.S. economy.
The most recent Consumer Price Index report revealed that inflation climbed 0.4% in October, exceeding prior expectations.
“Inflation is not trending in the right direction,” TD Securities said Friday in a note to <a The October report not only surprised our own forecast, it was also not driven by a particular factor or two as had been the case in recent reports. Price pressures appear to be broadening."
According to EY-Parthenon chief economist Gregory Daco, October marked the third consecutive month of higher-than-anticipated price increases, fueled by strong economic demand and supply chain limitations. Daco is currently projecting rate hikes for both December and January.
“For any borrower, this will mean a high cost of borrowing for any type of consumer loan people take out,” Daco told CBS News. “A higher federal funds rate trajectory will generally mean higher long-term interest rates and increase the cost of borrowing for consumers across the country.”
Interest rate traders currently estimate a nearly 90% probability of a quarter-point hike during the Fed’s Dec. 8-9 meeting, with better-than-even odds for a similar increase at the Jan. 26-27 gathering.
Some Fed officials have indicated that more aggressive tightening may be necessary to align inflation with their 2% annual goal. During a conference in London on Tuesday, Fed Governor Christopher Waller suggested that policymakers should weigh a 0.50 percentage-point increase in December, noting that a smaller hike “would put our credibility at risk.”
Elevated energy costs remain a primary driver of inflation, alongside significant corporate investment in data centers and equipment to support artificial intelligence.
“Together, these forces could keep inflation elevated into 2027 and weigh further on household purchasing power,” Daco said in a report.
