The Federal Reserve’s December decision now hangs on a single number. October’s consumer price index arrives on Tuesday, November 10, at 8:30 a.m. Eastern — the last inflation reading the Fed will see before it votes on December 9 — and it lands a week after a jobs report that pushed rate-hike bets to roughly 75–80%.
The jobs half: answered, and loudly
October payrolls rose by 165,000, the Bureau of Labor Statistics reported on November 6 — roughly two and a half times the 65,000 economists had expected, a beat of about 100,000 jobs. Unemployment ticked down to 4.1%. The two-month average of job gains now stands at 112,500, against a 12-month average of just 48,000: the labor market is not merely holding up, it is re-accelerating.
What September already told us
The last inflation print was not gentle. September CPI rose 0.6% on the month and 3.7% from a year earlier, the BLS reported on October 14 — both the fastest readings in months and both above consensus. Core CPI rose 0.3% on the month and 2.6% on the year. Gasoline alone accounted for more than half of the monthly increase, jumping 9.1%, while shelter — the largest single component — rose 0.4%.
The September numbers matter for tomorrow in two ways. First, they set the bar: consensus expects October to cool from September’s pace, with headline CPI rising 0.3% on the month and core up 0.2%. Second, they expose how thin the Fed’s margin has become. With the federal funds rate at 3.75%–4.00% and headline inflation running at 3.7%, the real policy rate is now near zero. In real terms, policy is barely restrictive at all — an uncomfortable position for a central bank that spent two years insisting it was still leaning against inflation.
The December hike test: a scorecard
Four data points stand between now and the December 9 decision. One is in the books; three are still to come.
| Data point | Timing | Status | Reading / expectation | What it means for December |
|---|---|---|---|---|
| October jobs report | Nov 6 | Released | +165,000 payrolls, 4.1% unemployment — vs ~65,000 expected | Hike case strengthened; labor market no longer an argument for waiting |
| October CPI | Nov 10, 8:30 a.m. ET | Scheduled | Headline +0.3% m/m, core +0.2% m/m expected | The decisive test — see scenarios below |
| October PPI | Nov 13, 8:30 a.m. ET | Scheduled | +0.4% m/m expected, after September’s +1.3% | A second inflation check; feeds into the Fed’s preferred PCE gauge |
| November jobs report | Dec 4, 8:30 a.m. ET | Scheduled | Not yet forecast in detail | Final labor data before the FOMC meets Dec 8–9 |
| FOMC decision | Dec 9, 2:00 p.m. ET | Scheduled | New economic projections released | The vote itself; hike odds now roughly 75–80% |
The calendar is tight by design: the November jobs report lands just four days before the meeting. In practice, that makes Tuesday’s CPI the last number with room to change minds.
Three scenarios for Tuesday
| Scenario | Core CPI (m/m) | Headline CPI (m/m) | Likely market read |
|---|---|---|---|
| Soft surprise | +0.1% or less | +0.1% or less | Hike odds fall sharply; the wait-and-see camp argues one hot jobs report is not a trend |
| As expected | +0.2% to +0.3% | +0.3% | Hike odds hold near current levels or edge higher; December hike becomes the base case |
| Hot surprise | +0.4% or more | +0.4% or more | Hike odds move toward fully priced; debate shifts to whether the Fed hikes by more, or signals another in early 2027 |
The “as expected” row is the most likely — and the most consequential. A 0.3% monthly headline gain would leave annual inflation near 3.7%, with core easing only slightly to around 2.5%. That is not a number that lets a central bank sit still, not with the labor market re-accelerating and the real policy rate near zero.
The soft scenario is the only one that genuinely reopens the debate. It would take a downside surprise — core at 0.1% or below — to give doves something concrete to point to. Monex’s Nick Rees made the same point from the other side: without a significant downside surprise in this CPI report, or a clearly weak November jobs report, a December hike could become almost fully priced before the meeting.
The case for a hike, and the case against
The argument for hiking is now straightforward, and it rests on the data rather than on rhetoric. Jobs are beating forecasts by wide margins. Headline inflation is running at 3.7%, nearly double the Fed’s 2% target, and it re-accelerated in September. The real policy rate has drifted to roughly zero. Two of the world’s other major central banks have already moved the same way: the Bank of England raised its rate to 4.00% last week, its first hike since August 2023. The Fed would not be moving alone; it would be catching up.
The argument against is thinner, but it is not empty. First, the September CPI spike was heavily energy-driven — gasoline accounted for more than half of the monthly increase — and energy prices are volatile by nature. A cooler October print could show that spike fading rather than spreading. Second, the November 5 market selloff, in which the Nasdaq fell 5.52% and semiconductor shares dropped more than 12%, was a reminder that financial conditions can tighten on their own, without the Fed’s help. Third, the Fed’s own projections will be refreshed in December, and officials may prefer to wait for that fuller picture rather than hike on the basis of two hot prints.
Both cases will be argued by Fed officials themselves this week. Governors Christopher Waller, Michelle Bowman and Michael Barr, along with Vice Chair Philip Jefferson, are all scheduled to speak — and their remarks will be read as closely as the data for any sign of where the committee’s center of gravity sits.
What to watch next
Tuesday’s CPI is the week’s main event, but it is not the only one. China’s October CPI and PPI are due at 9:30 a.m. Beijing time today, with consumer inflation expected near 0.8% year on year — a reminder that disinflation is still the story in the world’s second-largest economy, even as it fades in the United States. October PPI follows on Friday, November 13, and the November jobs report on December 4 is the final input before the vote.
For readers tracking the December decision, the sequence is simple: watch the month-on-month core number on Tuesday morning. At 0.2% or 0.3%, the hike stays the base case. At 0.1% or below, the debate reopens. At 0.4% or above, the only remaining question is how much further the Fed is prepared to go.
This article is for informational purposes only and does not constitute financial advice. Data are sourced from the U.S. Bureau of Labor Statistics, the Federal Reserve, and market consensus surveys as cited.
