Federal Reserve and Bank of England Weigh December Rate Hikes
The Federal Reserve and Bank of England are signaling potential interest rate increases in December to combat rising inflation driven by energy costs and tariffs.
Central banks in the United States and United Kingdom are preparing for potential interest rate hikes in December as inflation persists. In the U.S., prediction markets price a quarter-point increase by the Federal Reserve System at over 90%, following data from the Bureau of Labor Statistics showing October core prices rose 0.3%.
Federal Reserve Governor Christopher Waller advocated for a 25-basis-point hike to maintain credibility, suggesting a 50-basis-point increase if core inflation remains high. Bank of America economists have added a January hike to their forecasts, arguing the central bank is behind the curve on inflation driven by AI investment, consumer demand, and import tariffs imposed by President Donald Trump.
Across the Atlantic, the Bank of England is managing inflation that rose to 3.5% in September and is projected to exceed 4% next year. While Reuters-polled economists expect the Bank Rate to hold at 4.00% until February, interest rate futures suggest a December move is more likely. Deputy Governor Clare Lombardelli stated that both the December and February meetings remain live, noting that upcoming data will determine the timing of the next action.
