Wall Street Banks Raise Fed Rate-Hike Forecasts After U.S. Inflation Beats Expectations

U.S. inflation exceeded expectations for a third consecutive month in October, prompting Wall Street firms to raise their forecasts for further Federal Reserve rate increases. According to Sina Finance, citing Reuters, all 101 economists surveyed on November 10 expected a 25-basis-point rate hike in December; 56 said it would be the final increase of the tightening cycle, while 45 expected at least two more hikes. The U.S. Labor Department reported that October’s consumer price index rose 0.4% month over month, above the 0.3% forecast, while core CPI increased 0.3%, exceeding the 0.2% estimate. After the release, the market-implied probability of a 50-basis-point December hike rose to 11.6% from nearly zero. Citigroup still expects a 25-basis-point increase but said the risk of a 50-basis-point move had risen. Fed Governor Christopher Waller had said the Fed should consider a 50-basis-point hike if core CPI rose at least 0.3% in October. Goldman Sachs now expects 25-basis-point hikes in December and March 2027, revising its earlier forecast that the cycle would end in December. It also pushed its forecast for the first rate cut from September 2027 to December 2027, followed by 25-basis-point cuts in March, June, and September 2028. Chief U.S. Economist David Mericle said he expected inflation to decline significantly by the end of 2027 as price pressures related to tariffs, energy, and artificial intelligence ease. Deutsche Bank added a forecast for a 25-basis-point hike in January 2027 to its previous calls for increases in December 2026 and March 2027. It sees the target range rising from 3.75%-4.00% to 4.50%-4.75% over three consecutive meetings.