US Inflation Surges in October, Raising December Rate Hike Expectations

The US Consumer Price Index rose 0.4% month over month in October, surpassing economists' projections of 0.3%, according to the Bureau of Labor Statistics ¹. Core inflation, which excludes volatile food and energy costs, climbed 0.3% against expectations of 0.2% ¹. The Federal Reserve currently maintains its benchmark interest rate at 3.75% to 4.00% following a quarter-point increase in September and an unchanged decision in October ¹.

Ahead of the data release on Nov. 10, Federal Reserve Governor Christopher Waller said in London that another monthly core reading at or exceeding 0.3% would warrant considering a larger move ¹. "In that case, I believe a 50-basis-point hike in the policy rate should be considered at the December meeting," Waller noted, warning that a smaller quarter-point hike could compromise policy credibility ¹. Following the release, CME FedWatch data indicated an 88.3% probability of a 25-basis-point increase in December alongside an 11.7% chance of a 50-basis-point hike ¹. STS Digital Head of US Jeff Anderson said markets priced roughly 27 basis points of tightening into the December curve ¹.

Impact on Crypto Yields and Policy

Higher borrowing costs threaten to compress returns across decentralized finance, particularly for carry trades ¹. Tesseract Group Head of Asset Management Adam Haeems noted that lending rates for $USDC on the primary Aave market spanned 3.2% to 7% over the prior two weeks, while three-month Treasury yields stood near 4.2% ¹. As yields on risk-free government debt remain elevated, risk-adjusted demand for crypto lending products faces headwinds ¹.

Macro headwinds coincide with political shifts following the US midterm elections, where Democrats secured majorities in both congressional chambers ¹. While Congress does not dictate monetary policy, market participants anticipate intensified legislative pressure on consumer prices ¹. Meanwhile, regulatory measures such as the CLARITY Act remain stalled since January due to partisan differences, extending uncertainty over US digital asset frameworks ¹. At the time of writing, $BTC was trading at $72,850 and $ETH at $2,018, as broader risk sentiment tracked macro tightening expectations.