A growing number of Federal Reserve policymakers are teasing more interest rate hikes in the months ahead.
As inflation remains firmly above the U.S. central bank’s 2 percent target, monetary authorities say more work needs to be done.
Chicago Fed President Austan Goolsbee, in a Nov. 10 interview with “PBS NewsHour,” called October’s consumer price index “distressing” and “borderline disturbing.”
“We’re going to have to deal with that,” Goolsbee said.
Consumer prices rose by 0.4 percent last month, higher than the consensus forecast. Excluding food and energy, core inflation jumped by 0.3 percent, also higher than the market estimate.
Goolsbee did not confirm whether he supports continuing rate hikes.
“I’m not a fan of being very specific and tying our hands at the next meeting or meetings in the future,” he said.
The Fed raised interest rates in September for the first time in more than three years, lifting the benchmark federal funds rate to a fresh target of 3.75 percent to 4 percent. The central bank hit the pause button a month later.
Investors now expect another rate hike at the December policy meeting.
So far, New York Fed research shows that inflation expectations are well anchored. But Goolsbee said it would be more harmful to combat inflation should higher inflation become embedded in everyone’s price expectations.
In the New York Fed’s latest Survey of Consumer Expectations, the one-year inflation outlook held steady at 3.9 percent. The three- and five-year forecasts also were unchanged at 3.3 percent and 3 percent, respectively.
The University of Michigan’s preliminary November consumer sentiment index showed the median expected price change over the next 12 months to be above 4 percent.
But while consumers are concerned about prices, inflation expectations are more stable among businesses and investors.
As of Oct. 21, the Atlanta Fed’s year-ahead Business Inflation Expectations survey was 2.3 percent. The St. Louis Fed’s five-year breakeven inflation rate—what markets expect inflation to be in the coming years—was 2.25 percent on Nov. 10, down from the start of 2026.
These numbers are crucial to the Fed’s policy path, says Russell Thompson, chief investment officer at Hilbert Group.
“That will be one of the big headwinds to a hike, because the Fed is not reacting to what is right in front of it but looking at where it thinks the market is going,” Thompson said in a note emailed to The Epoch Times.
‘Excess Inflation Is Unacceptable’
Despite a mixed inflation outlook, traders are anticipating higher interest rates amid hawkish positions from multiple Fed officials.
The U.S. government bond market was spooked this week after Fed board member Christopher Waller suggested that he and his colleagues might need to consider a jumbo-sized rate hike.
Waller, who had been considered a candidate to become chairman of the Federal Reserve earlier this year, said he may support “more robust action” if inflation readings surpass forecasts.
“In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting,” he said in a Nov. 10 speech overseas. “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”
Dallas Fed President Lorie Logan, meanwhile, indicated that the rate-setting Federal Open Market Committee needs to pull the trigger on “at least two more 25-basis-point rate increases.”
“Excess inflation is unacceptable,” Logan said in prepared remarks hosted by the Dallas and Kansas City Fed Banks on Nov. 10.
In response to a hot consumer price index and hawkish Fed comments, the 10-year yield briefly breached the 5 percent mark before settling near 4.98 percent.
The two-year, which typically tracks Fed policy expectations, jumped by about 17 basis points to 4.73 percent, the largest single-session gain since April 2025.
The 30-year climbed to nearly 5.36 percent.
The October producer price index—a gauge of prices businesses pay for goods and services and pass on to consumers—could be the next catalyst for financial markets.
Producer inflation is expected to rise by 0.4 percent. The monthly core reading is also forecast to jump by 0.3 percent.
Whether the institution follows through on a super-sized rate hike next month or conducts a series of increases throughout 2027, Fed Vice Chair for Supervision Michelle Bowman agreed that action is needed.
“Today, I am seeing signs that inflation pressures are persisting, while labor market conditions appear to be firming,” Bowman said in a Council on Foreign Relations speech on Nov. 10. “This indicates that there is still work to do to bring inflation closer to 2 percent.”
The Federal Reserve will not be alone in this effort to lower inflation.
As the World Tightens
The major central banks could be ready to hike to close out the year and after flipping the calendar to 2027.
After what Fed Chairman Kevin Warsh called global “synchronous tightening,” a few of the major central banks paused to scan economic conditions. But monetary policymakers may be ready to hike again, and higher bond yields will not deter them.
“The recent surge in government bond yields—which is spilling over into higher financing costs for households and businesses—is unlikely to deter central banks from raising policy rates further,” economists at Oxford Economics said in an Oct. 28 research note.
“We expect major central banks will continue to tighten in coming months.”
A majority of economists polled by Reuters expect the Bank of Japan to raise its policy rate to 1.5 percent in December and then implement a quarterly hike plan.
The European Central Bank is projected to follow through on a quarter-point hike in December as eurozone inflation jumped to 4 percent last month.
Investors see a 50 percent chance the Bank of England will deliver back-to-back 25-basis-point hikes next month. This would bring its policy rate to 4.25 percent.
After last month’s first rate hike since 2023, traders are split on whether the Bank of Canada has the appetite to raise rates again next month.
A summary of the governing council meeting released on Nov. 10 found that officials are cautious but considering more rate hikes.
