• A half-point December rate hike is now under discussion, though a quarter-point move remains the base case.
  • Sticky inflation, resilient employment, and hawkish Fed commentary have revived the case for larger tightening.
  • Markets price roughly 85% odds of at least a quarter-point increase, with a small but growing chance of a bigger move.

A Larger Move Emerges as a Possibility

A 50-basis-point interest rate hike at the Federal Reserve's December meeting is back on the table, according to commentary from Natixis and recent remarks from Fed Governor Christopher Waller. While a quarter-point increase is still the most likely outcome, the debate has shifted: hotter-than-expected inflation data and more forceful communication from policymakers have convinced some observers that a larger move is now a live option.

Prediction markets currently assign a 12% probability to a hike exceeding 25 basis points in December, versus 85% for a standard 25-point increase, according to data cited by Natixis. That marks a notable shift from earlier expectations, when a pause or a modest hike was widely anticipated.

Inflation and Jobs Keep Pressure On

The case for a bigger hike rests on three pillars, as outlined by Waller on November 10. First, inflation remains uncomfortable. September CPI rose 0.6% month over month and 3.7% year over year, with gasoline surging 9.1% and accounting for more than half the headline gain. Core CPI, excluding food and energy, increased 0.3% monthly and 2.6% annually. Meanwhile, core PCE—the Fed's preferred gauge—climbed 0.3% monthly and 3.1% annually.

Second, the labor market has held up. October payrolls rose by 165,000, and unemployment fell to 4.1%, undermining arguments that weakening employment should deter further tightening. Third, Fed communication has grown more hawkish. Waller explicitly linked a possible half-point move to persistent inflation and the central bank's credibility, stating that a hotter reading would justify considering 50 basis points.

"If inflation continues to surprise to the upside, we need to be prepared to act more aggressively," Waller said, according to people familiar with his remarks. He added that the Fed's credibility is on the line if it fails to bring inflation back to target.

Market and Economic Implications

The Fed held its target range at 3.75%–4.00% in October, following a September increase—its first since 2023. A quarter-point hike in December would lift the range to 4.00%–4.25%, while a half-point move would bring it to 4.25%–4.50%. The larger increase would intensify pressure on households and businesses facing higher borrowing costs, particularly those with floating-rate debt. Savers could benefit from higher returns on cash and short-term instruments, though deposit rates may not match the Fed's move. Bond and equity markets could see volatility if the hike exceeds expectations, with short-term yields rising and interest-sensitive sectors facing headwinds.

A stronger dollar, should it follow, would increase the burden of dollar-denominated debt for global borrowers. The transmission channels are conditional, however, and market reactions to the December decision will depend on how well the move is anticipated.

Data Disruption Adds Uncertainty

The October CPI release, originally scheduled for today at 8:30 a.m., has been delayed due to the October 2025 federal shutdown, which prevented collection of that month's data. As a result, the October 2026 report will lack the usual official year-over-year comparison, making monthly and multi-month trends especially important. The official BLS page still displayed September data at the time of writing, leaving analysts to rely on other indicators.

Natixis economist Christopher Hodge, in a November 9 preview, expected inflation to moderate, with headline CPI rising about 0.29% and core up 0.22% monthly. Still, he considered another December hike warranted, though he stopped short of calling for a half-point move. The firm's commentary supports further tightening but does not make 50 basis points its central forecast.

The Broader Policy Debate

The debate over the pace of tightening reflects differing assessments of inflation dynamics. Waller highlighted energy-price pass-through, constrained diesel refining capacity, and rising prices for high-tech goods linked to AI investment as potential sources of persistent inflation. Natixis, by contrast, identified tariffs and the war in Iran as supply-side pressures it expects to fade over time. The disagreement centers on how durable these pressures will be.

A relevant precedent is December 2022, when the Fed unanimously approved a 50-basis-point increase, demonstrating that half-point moves are an established policy option. The current situation also fits a broader international tightening theme, with J.P. Morgan (NYSE:JPM) noting that the Fed is one of several central banks raising rates in 2026.

As of 8:47 a.m. EST on November 10, 2026, the exact prediction-market probabilities could not be independently confirmed, but contemporary reporting supports roughly 80–85% odds of a quarter-point increase. The next Fed decision is scheduled for December 9, following the December 8–9 meeting.

Correction: An earlier version of this article misstated the date of the October CPI release. It was scheduled for November 10, not November 9. The error is regretted.