Fed policy: TD Securities sees December hike as assured, with 50bps risk

An upside surprise in US CPI and firm Core PCE projections leave a December Fed rate hike virtually certain, according to TD Securities’ macro research team. While a 25bp increase remains their preferred outcome, they see a growing chance of a further hike in early 2027. A 50bp “catch-up” increase in December is also a clear possibility in their view, subject to PPI data and further commentary from Fed officials.

Focus turns to whether Fed raises rates by 25bp or 50bp

"The strong upside surprise in today's CPI makes a December hike all but certain, in our view."

"After Waller's speech this morning, the debate has now shifted to whether the FOMC will go 25 or 50bps."

"We still favor a 25bp hike with a rising risk of another hike in January."

"We believe that today's data certainly seals a Dec rate hike by the Fed."

"However, following Governor Waller's remarks pre-CPI, the discussion will now center around the need for implementing a "catch-up" 50bps rate hike in December, or whether to maintain course with a 25bps rate increase and provide strong guidance toward a potential January follow-through."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)