News · 14 November 2026 · 7 min
Will the Fed Raise Rates in December 2026? 25 or 50 bp
Will the Fed hike on December 8-9? Hot October CPI (+0.4%) and PPI (+6.5% YoY) have a hike priced in. The 25 vs 50 bp scenarios and key dates to watch.
In short: the Federal Reserve heads into its December 8-9 meeting with a 25-basis-point rate hike all but fully priced in, after October's CPI (+0.4% month on month) and producer prices (+6.5% year on year) confirmed that inflation is not backing down. The question is no longer whether the Fed will hike, but whether it moves by 25 or 50 basis points and whether it hikes again in January.
The week of November 9-13, 2026 rewrote the script for the Fed. On Tuesday, November 10 the Labor Department published an October CPI reading that came in hotter than expected, and on Friday, November 13 producer prices posted their biggest annual rise since November 2022. In between, several Fed officials argued in public for tighter monetary policy. Here is what happened, how markets are pricing it and which dates you need to mark in your calendar.
Will the Fed raise rates in December 2026?
Everything points to yes. After the October CPI report, CME Group's FedWatch tool put an 85% probability on a 25-basis-point hike at the December 8-9 meeting and 15% on a 50-basis-point move, according to CBS News. From the current 3.75%-4% range, a quarter-point move would take it to 4%-4.25%.
That is a notable shift: at its October meeting the Fed left rates unchanged, although two FOMC members already voted for a hike. Most of the market now takes it for granted that the next decision will be a rise.
Background: the Warsh Fed already hiked in September
December would not open the cycle; it would be the second hike. On September 16, 2026 the Fed, chaired by Kevin Warsh, raised rates by 25 basis points unanimously (12 votes to 0) to a 3.75%-4% range. It was its first hike since 2023, according to Euronews. In October it paused, with two votes in favor of hiking again.
The September projections (the "dot plot") were already a warning: 12 of the 18 members expected another quarter-point hike before year-end and four saw the rate at 4.375%. In other words, a December hike would fit what the Fed itself signaled; going further is what would surprise.
What happened: October's inflation data
October CPI: a third straight upside surprise
Consumer prices rose 0.4% in October, against the 0.3% expected by analysts polled by FactSet and after September's 0.6%. Core inflation, excluding food and energy, rose 0.3%, the same pace as the previous month and above forecasts for a third month in a row, as Bloomberg highlights.
One technical detail worth knowing: this time there is no official year-on-year CPI rate, because the 2025 government shutdown left October 2025 without data. That is why markets are focusing on the monthly readings.
By component, shelter rose 0.3% and accounted for more than 30% of the monthly increase; food rose 0.5% after being flat in September; and energy rose 0.7%, far below the previous month's 5.2%.
Producer prices: highest annual rate since 2022
On Friday, November 13 came the producer price index (PPI). It rose 0.3% on the month, slightly less than expected, but its annual rate reached 6.5%, the highest since November 2022, according to the Bureau of Labor Statistics (BLS) and CNBC. The core measure excluding food, energy and trade services eased to 4.9% from 5%. Wholesale food prices rose 1.3% on the month.
| Indicator (October 2026) | Reading | What it means |
|---|---|---|
| Headline CPI, month on month | +0.4% | Above the 0.3% forecast |
| Core CPI, month on month | +0.3% | Third straight month above expectations |
| Headline PPI, year on year | +6.5% | Highest since November 2022 |
| Headline PPI, month on month | +0.3% | Slightly below forecast |
| Core PPI, year on year | +4.9% | Down from 5% in September |
Why it matters: the Fed is talking about credibility
Fed officials' tone hardened markedly this week. Chicago Fed President Austan Goolsbee told CNBC on Friday that the central bank has work to do to restore its credibility, and acknowledged that inflation has been above the 2% target for almost six years.
"Lately we're not making any progress." Austan Goolsbee, Chicago Fed, on CNBC.
Goolsbee blames part of the problem on demand overheating linked to the build-out of artificial intelligence data centers. New York Fed President John Williams said on Thursday that inflation is "too high", and Boston Fed President Susan Collins argued for further tightening soon, on a meeting-by-meeting basis, according to Yahoo Finance.
The most hawkish voice is Governor Christopher Waller, who before the CPI release had opened the door to a half-point hike if core inflation rose 0.3% or more. The reading came in at exactly 0.3%, so his stance gains weight within the committee.
Will the Fed hike 25 or 50 basis points? The two scenarios
Our reading is that the PPI data eases the pressure for a half-point move somewhat, because the monthly rise was smaller than expected and core wholesale inflation cooled. But the underlying message, persistent inflation and a Fed worried about its credibility, keeps the debate alive.
- 25 bp hike (base case): this is what the market is pricing. Capital Economics sees back-to-back hikes in December and January as the most likely path. In that case, the key will be the statement and the rate projections (the "dot plot") that the Fed updates in December.
- 50 bp hike (risk scenario): it would surprise a large part of the market. Jeffrey Roach of LPL Financial warns that a half-point move could pose unnecessary risks. If it happens, expect volatility in bonds, the dollar and stock indices.
What the major forecasters expect
| Institution | Forecast |
|---|---|
| Goldman Sachs | +25 bp in December and another hike in March 2027 (could be brought forward to January); first cut pushed back to December 2027 |
| Capital Economics | Back-to-back hikes in December and January |
| LPL Financial | +25 bp; sees unnecessary risks in +50 bp |
| Market (CME FedWatch) | ~85% for +25 bp and ~15% for +50 bp after the CPI |
Goldman's forecast is reported by investingLive. With two more hikes, the range would end up at 4.25%-4.5% (our own calculation).
The December dot plot: the other decision
If the new dot plot shows more hikes in 2027 than September's, the message would be more hawkish than the hike itself. That is the detail most likely to move the dollar and bonds on December 9.
Market reaction and what it means for traders
A hiking cycle that is already under way shifts flows between asset classes. For active traders, these are the most direct consequences:
- Dollar: higher US rates tend to support the dollar against currencies whose central banks are not hiking. You can track that in our currency strength tool.
- Stocks: tech and growth stocks are more sensitive to rates. That is why the Nasdaq usually reacts more strongly than the Dow Jones to inflation surprises; watch the breadth of the move on the heat map.
- Volatility around key dates: on data and Fed meeting days spreads widen and price gaps are common. If you trade with leverage or CFDs, size your positions with the position size calculator and remember you can lose money faster than you expect (see our risk warning).
None of this is a recommendation to buy or sell: it is the framework the market is using to read the data.
What to watch next and when
Between now and the meeting there are several releases that could tip the balance between 25 and 50 basis points. You will find them all in our economic calendar:
- October PCE: the Fed's preferred inflation gauge. Capital Economics estimates core PCE rose about 0.29% on the month, which would lift its annual rate to around 3.2% from 3.1%.
- November jobs report: a strong labor market would reinforce the demand-overheating argument.
- Fed speeches: there is a blackout period before each meeting; the last comments before it carry a lot of weight in market pricing.
- November CPI: expected to be released after the meeting, so the Fed will decide without it; that is why PCE and jobs data matter more.
- FOMC meeting on December 8-9: decision, statement, press conference and new economic projections.
Frequently asked questions
When is the next Fed meeting?
On December 8-9, 2026. The decision is released on the second day, followed by the chair's press conference and the new rate and inflation projections.
How much did US CPI rise in October 2026?
Headline CPI rose 0.4% on the month and core CPI 0.3%. There is no official annual rate because the 2025 government shutdown left October 2025 without data.
Why is the Fed raising rates instead of cutting them?
Because inflation has been above 2% for almost six years and has stopped falling. Several Fed officials attribute part of the pressure to excess demand, and raising rates makes credit more expensive to cool it down.
How many times has the Fed raised rates in 2026?
Once, on September 16, by 25 basis points to 3.75%-4%. If it hikes in December, it would be the second of the year and of the cycle.
What happens to the dollar if the Fed hikes?
In general, higher rates tend to support the dollar, although much of the hike is already priced in. What moves markets most is the gap between what the Fed does and what was expected.