Tuesday's price index and an 80% bet on a December rise

Futures markets now price a US rate rise in December as the likely case. Expectations of an increase of at least 25 basis points at the Federal Reserve’s December meeting moved up to nearly 80% after Friday’s jobs report, according to the CME FedWatch tool¹. Bloomberg’s wrap puts it the same way: almost 80% odds of a hike by year-end².

The receipt comes Tuesday. The October consumer price index is due on Tuesday, and producer prices follow on Friday³. Reuters notes that the CPI reading “could further cement” expectations for next month¹. John Williams, president of the New York Fed, has said growth has been “remarkably resilient” through successive shocks, but that inflation is too high and it is essential to bring it back to 2%¹. That is a central banker describing his job, not announcing a date.

The dollar already moved. The greenback had its biggest one-day gain in five months on Friday; the dollar index was last at 102.2 on Monday morning¹. The euro stood at $1.1148, little changed¹. The US 10-year Treasury yield rose two basis points to 4.88% in Asian trading².

Why it reaches your kitchen. In euro-area households, a stronger dollar works against you on anything priced in dollars, above all oil and its products. Brent slipped again on Monday, to $97.53 a barrel³; a firm dollar takes back a little of that relief. The European Central Bank sets its own rate, but a Fed move still shapes the exchange rate at which Europe buys its fuel.

The sensible stance. Do not trade the probability. Read the price index on Tuesday, and then read what the Fed actually says in December. Two dull documents beat a hundred forecasts. Nothing here is investment advice.