• Northlight Asset Management’s Chris Zaccarelli expects the Federal Reserve to raise interest rates by 25 basis points in December, following a hotter-than-expected September inflation report.
  • Zaccarelli believes the Fed will hold rates at its October 27–28 meeting, partly due to its proximity to the U.S. midterm elections.
  • Despite rising rates, Zaccarelli anticipates stocks will remain resilient, though election-related uncertainty could trigger short-term volatility.

Inflation Runs Hot

September consumer prices rose 0.6% month over month and 3.7% year over year, up from 3.4% annually in August, according to data released Wednesday. The annual figure exceeded the Reuters (TRI) consensus forecast of 3.6%, while the monthly headline increase matched expectations. Core inflation, which excludes food and energy, climbed 0.3% monthly and 2.6% annually, up from 2.4%.

The report immediately rippled through markets. Futures briefly implied roughly even odds of a rate hike at the Fed’s October meeting, a sharp shift from previous expectations. The next Fed meeting is scheduled for October 27–28, just before the midterm elections.

Zaccarelli Sticks to December

In an interview with Reuters on October 14, Zaccarelli, chief investment officer at Northlight, maintained his view that the Fed will hold off in October. “No raise in October, but they will probably raise rates in December,” he said. His forecast aligns with the headline’s central claim, though the quoted passage does not independently confirm the precise 25-basis-point move, election timing, or stock-market resilience.

The Fed raised its policy-rate range by 25 basis points in September to 3.75%–4.00%. A December increase would bring it to 4.00%–4.25%. Minutes from the September meeting showed most participants considered another hike appropriate before year-end, while emphasizing that decisions would depend on incoming data.

Market Jitters and Election Overhang

Zaccarelli’s optimism about stocks faces an early test. The S&P 500 fell more than 1% on Wednesday as inflation and financing concerns intensified an AI-stock selloff, Reuters reported. That pullback qualifies—but does not necessarily disprove—his longer-term resilience thesis.

The October meeting’s proximity to the midterm elections adds a political dimension. Some analysts argue that waiting until December avoids an especially sensitive decision. Others see the inflation data as sufficient reason to act sooner. That is analyst interpretation, not a stated Fed commitment to avoid election-adjacent hikes.

Energy and AI: Twin Inflation Drivers

Two developments make this report particularly consequential. First, energy inflation is spreading beyond fuel. Gasoline helped drive headline prices, but analysts also identified firmer prices in autos, airfares, education, and recreation. The concern is that an energy shock becomes persistent inflation across a broader set of goods and services.

Second, AI investment is supporting growth while increasing financial pressure. Fed minutes identify strong AI-related capital spending as a source of economic resilience, but also point to input-cost pressures and heavy borrowing to finance infrastructure. Higher rates therefore confront a market whose recent strength partly depends on investment-intensive technology businesses.

Treasury yields initially jumped after the inflation report, then retreated as investors sought safety during the technology selloff. Higher inflation can push yields upward, while concerns about growth or financial stress can pull them back down.

What to Watch

A December quarter-point increase remains a prominent forecast. Edward Jones economist James McCann expects a December hike and another in 2027; Boston Fed President Susan Collins said on October 13 that further tightening before year-end would likely be appropriate. Neither statement makes the timing certain.

Some analysts now see an October move as possible. Spartan Capital’s Peter Cardillo raised the possibility of a 50-basis-point December increase if oil prices remain elevated. These are alternative forecasts, not an agreed policy path.

The Fed’s 2% inflation objective applies to the Personal Consumption Expenditures price index, not CPI. Still, CPI matters because it provides timely information about inflation pressures and informs forecasts of PCE inflation.

Northlight Asset Management, a Charlotte-based investment advisory firm, had more than $958 million in assets under advisement as of December 31, 2025, according to Zaccarelli’s professional profile. That is a self-reported measure, not independently verified regulatory assets under management.

Correction: An earlier version of this article misstated the date of the September inflation report. It was released on October 12.