Fed ‘going to have little patience with inflation’: Russell Investments

Even a modest increase in Tuesday's consumer price index report could trigger a December interest rate hike from the Federal Reserve, according to BeiChen Lin, a senior investment strategist at Russell Investments. "Following an impressive jobs report and other indications of a robust economy, the Fed will have minimal tolerance for inflation," Lin remarked.

Currently, traders are assigning an 84.5% probability of a 25 basis point increase at the Fed's meeting on December 9, up from 76.3% the previous day, as indicated by CME FedWatch. Lin pointed out that high mortgage rates are negatively impacting the housing market, which could help curb some inflationary pressures. In addition to the headline figures, Lin emphasized that investors will also monitor the extent of price hikes across the economy, as this will significantly influence future Fed decisions.

Lin also noted that Thursday's stock market decline has diminished some of the earlier market optimism. "With investor sentiment becoming more cautious rather than overly exuberant, markets may respond favorably if inflation proves to be milder than anticipated," he added.