Fed's Goolsbee: Inflation is broad, moving in the wrong direction.

Data from the London Stock Exchange Group shows that after U.S. October producer price gains came in lower than expected, the likelihood of the Federal Reserve raising interest rates by 25 basis points in December has increased relative to the probability of a 50 basis point hike. The PPI index rose 0.3% month-on-month, below analysts’ forecast of 0.4%; the year-on-year reading was up 6.5%, also missing the 6.6% expectation. Following the data release, money markets priced in a 91% probability of a 25 basis point Fed rate hike, up from 86% prior to the release; meanwhile, the probability of a 50 basis point hike fell from 14% to 9%.

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U.S. producer prices rose further in October, marking the largest annual increase in four years, reinforcing market expectations that the Federal Reserve may raise interest rates again after the widely anticipated rate hike next month. The U.S. Bureau of Labor Statistics (BLS) said Friday that October PPI rose 0.3% month-on-month, below the 0.4% consensus estimate, with the prior month’s figure revised up to 1.4%. Last month’s producer prices were lifted by a 0.5% gain in goods prices, driven mainly by food and basic organic chemicals. Services prices rose 0.2%, marking the fifth consecutive month of increases. October PPI surged 6.5% year-on-year, the largest annual rise since November 2022, following a 6.3% increase in September. The report arrives after this week’s October CPI data came in hotter than expected. Additionally, October nonfarm payrolls surged as released last week, with the unemployment rate dropping to 4.1% from 4.2% in September. Combined with remarks from Federal Reserve Governor Christopher Waller, this has left financial markets torn between pricing in a 25 basis point rate hike in December and keeping the door open to a 50 basis point increase.

According to HTX market data, Bitcoin has rebounded to break through the $70,000 level, with a 3.62% decline in the past 24 hours.

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US Treasury Secretary Scott Bessent said excessive interest rate hikes would be inappropriate as the energy supply shock is set to subside. The Federal Reserve should focus on the future; the market is resilient, bond auctions are strong, and demand for the US dollar is robust. He voiced confidence in the economy, adding that conditions are very good with no warning signs.