Hot CPI reading cements expectations for 75 basis point Fed rate rise in November

Fed-funds futures traders priced in a 97.8% probability the Federal Reserve will lift its key interest rate by 75 basis points, or 0.75 percentage point, to a range of 3.75% to 4% in its early November meeting, up from 84.5% on Wednesday, according to the CME FedWatch tool. The move comes after a hotter-than-expected core reading of the consumer price index, which saw Treasury yields jump and stock-index futures erase gains to plunge sharply lower, with the Dow Jones Industrial Average DJIA, -1.73% on track to fall nearly 500 points at the opening bell while futures on the S&P 500 SPX, -2.23% dropped 2%. Fed-funds futures reflected a 2.2% chance of a 100 basis point hike. “We’re on board with a larger flattening, and while there is sure to be chatter on the potential for a 100 bp hike, this print cements 75 bp in November with the more relevant question whether December and February’s hikes will be upsized,” said Ian Lyngen, strategist at BMO Capital Markets, in a note.