US CPI Preview: Will Inflation Data Confirm a December Fed Rate Hike?

The US October CPI report, due on November 10, is the next important data point for markets. After a much stronger-than-expected jobs report, investors are now watching inflation to understand what the Federal Reserve may do at its December meeting.

The US economy added 165,000 jobs in October, against expectations of around 65,000. The unemployment rate also fell from 4.2% to 4.1%.

Following the jobs report, market expectations of a December rate hike increased to around 78%.

What is the market expecting from CPI?

Economists expect headline CPI to rise by around 0.3% in October compared with the previous month. Core CPI, which excludes food and energy prices, is expected to increase by around 0.2%.

This time, the US Bureau of Labor Statistics will not publish the annual CPI figure because October 2025 data was not collected during the government shutdown.

So, markets will pay more attention to the monthly numbers.

Why is CPI important for the December meeting?

The strong jobs report has shown that the US labour market is still holding up. This gives the Fed more reason to keep its focus on inflation.

If employment remains strong and inflation stays high, the case for another rate hike becomes stronger.

The October CPI report could push the current 78% market expectation higher or bring it down.

What should traders watch?

• CPI above expectations: This could increase the chances of a December rate hike and push US bond yields and the dollar higher.
• CPI in line with expectations: The market may continue to expect a December hike, with limited change in rate expectations.
• CPI below expectations: A softer reading could reduce the chances of a hike, especially if core inflation also cools.

Can CPI confirm a December rate hike?

The jobs report has already moved market expectations towards a December hike. Now CPI is the next important test.

If inflation comes in higher than expected, the market may become more confident about a rate increase. But if prices show a clear slowdown, some of those expectations could reverse.

The Takeaway

After strong jobs data, the focus has shifted to inflation. A higher CPI reading could strengthen the case for a December rate hike, while softer numbers could change the market’s view. The Fed’s final decision will depend on the overall economic data, not just one report.

Key dates: December Fed meeting - December 8–9.