U.S. Inflation Fuels Rate-Hike Bets, Putting Bank of Korea Under Pressure
U.S. inflation exceeded market expectations in October, adding to pressure on the Federal Reserve (Fed) to maintain a restrictive monetary policy. According to the Bureau of Labor Statistics (BLS) under the U.S. Department of Labor on Nov. 10, the Consumer Price Index (CPI) rose 0.4% from the previo
U.S. inflation surpassed market expectations in October, prompting pressure on the Federal Reserve to maintain restrictive monetary policy. The Consumer Price Index (CPI) rose 0.4% from the previous month, exceeding the 0.3% consensus estimate. Core CPI, which excludes volatile food and energy components, also increased 0.3% month-over-month.
Shelter costs accounted for more than 30% of the CPI increase. Food prices rose 0.5%, with food at home up 0.4% and food away from home increasing 0.5%. Energy prices climbed 0.7%, much lower than September's 5.2% increase. Year-over-year figures were not released due to a federal government shutdown. The Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, remained above 3%.
Fed Governor Christopher Waller hinted at a 25-basis-point rate hike in December, while Dallas Fed President Lorie Logan called for a second 25-basis-point increase. Market expectations turned bullish for further rate hikes, with fed funds futures pricing in a 100% probability of a December hike. The S&P 500 and Dow Jones fell as rate-hike concerns intensified, while technology stocks suffered steep losses.
The Bank of Korea (BOK) faces increased pressure from the Fed's hawkish stance, potentially widening the interest rate gap between the two countries.
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