The latest US inflation figures have unnerved international investors. On Tuesday, the yield on two-year US government bonds briefly climbed to 4.76 percent, the highest level in more than two years. Ten-year US Treasuries temporarily yielded more than 5 percent. 

Fed governor considers 50-basis-point rate hike

According to official figures, prices in the United States rose by 0.4 percent in October from the previous month, while economists had expected only 0.3 percent. Core inflation excluding energy and food also came in at 0.3 percent, slightly above forecasts of 0.2 percent.

The data are increasing pressure on the US central bank. On Tuesday in London, Fed Governor Christopher Waller explicitly raised the possibility of a 50-basis-point rate hike. Such a move would be the largest rate step since 2022. Waller had signaled a stronger tightening if monthly core inflation were once again to reach at least 0.3 percent. That is exactly the figure that has now been published. In his view, being too cautious could undermine the central bank's credibility.

However, in the futures markets, a 25-basis-point increase remains the most likely scenario. The probability is around 85 to 90 percent. A 50-basis-point rate move is still considered less likely. The Fed first raised its key rate in September for the first time in three years, by 25 basis points to a range of 3.75 to 4 percent. In October, it refrained from taking another step. The next decision is due on December 9.

Robust labor market makes the situation more difficult

Commerzbank economist Christoph Balz emphasizes that inflationary pressure in the United States remains high. "Not only gasoline prices have risen, prices have moved higher across the board." The core rate, which is important for the trend, remains too high and is no longer pointing downward. For Lindsay Rosner of Goldman Sachs, the current situation also suggests that the Fed's rate hikes could continue into next year. 

In addition to inflation, the employment situation also argues for a more restrictive monetary policy. In October, 165,000 new nonfarm jobs were created in the United States. Only 65,000 had been expected. The unemployment rate fell to around 4.1 percent. There are also the economic consequences of higher energy prices. In the Fed's view, the oil price shock in the Middle East could still feed through to core inflation through higher transport and production costs as far out as 2027.

Another source of uncertainty is the inflation statistics. Because of the government shutdown last year, comparison data for October 2025 are missing. As a result, the US statistical office was unable to publish a regular year-on-year inflation rate for October 2026. In September, it was still 3.7 percent.

Pressure on tech stocks as well 

Rising yields are weighing not only on the bond market. High-valued technology companies are especially affected, as their valuations depend heavily on long-term earnings expectations.  What matters now is not only how much the Fed raises rates in December, but how long it will have to maintain its restrictive monetary policy. Further rate hikes next year cannot be ruled out given the ongoing price pressure.

One complication is making the decision harder: The next regular US inflation data will not be published until December 10, one day after the Fed meeting.