U.S. Fed Officials Signal "Supersized Rate Hike"; 10-Year Yield Back Near 5% (Roundup)

Waller Flags Inflation Risks from Energy and AI
Logan Says at Least Two More Rate Hikes Are Needed
October CPI Rises 0.4%, Exceeding Expectations

The possibility that the U.S. Federal Reserve (Fed) could raise interest rates by 0.5 percentage points in a single move, a so-called “big step,” has pushed the 10-year U.S. Treasury yield back above 5%. Selling pressure on Treasuries appears to be mounting after Fed officials made hawkish remarks favoring tighter monetary policy and consumer price data came in higher than expected.

"A More Forceful Monetary Policy Response Is Needed"

Christopher Waller, a member of the U.S. Federal Reserve Board, speaks ahead of an interview in Washington, D.C., on September 3, 2026 (local time). Reuters-Yonhap News.

Christopher Waller, a member of the Fed’s Board of Governors, said in a speech at the “Bank of England and Observers Conference” in London on November 10 (local time) that “even if inflation in October improves from September, I would support raising the benchmark interest rate by 25 basis points (1 bp = 0.01 percentage points) at the Federal Open Market Committee’s (FOMC) regular meeting in December.”

He added, “If core consumer price index (CPI) inflation in October comes in at 0.3% or higher, a more forceful monetary policy response may be needed,” and said, “In that case, we should consider a 50-basis-point rate hike at the December meeting.” He stressed, “Raising rates by only 25 basis points could put our credibility at risk, and I do not want to take that risk.”

He expressed concern that cost pressures stemming from rising energy prices and increased investment in artificial intelligence (AI) would not ease quickly. He noted in particular that it was necessary to watch whether higher energy costs were being passed on to the prices of goods and services.

Lorie Logan, president of the Federal Reserve Bank of Dallas. Dallas Fed website

The October CPI report, released after Waller’s speech, also exceeded market expectations. According to the U.S. Department of Labor, the CPI rose 0.4% in October from the previous month, above the market forecast of 0.3%. Core CPI, which excludes food and energy, also rose 0.3%, exceeding the expected 0.2%. Core CPI inflation has been 0.3% for three consecutive months since August.

That same day, Lorie Logan, president of the Federal Reserve Bank of Dallas, said in a speech at an energy conference in Texas, “The October CPI released this morning was higher than expected,” adding, “I am concerned that personal consumption expenditures (PCE) inflation for October, due to be released in a few weeks, could also be higher.” She said, “The exact pace may differ, but the FOMC could move faster this winter than it did this fall,” reaffirming her view that the benchmark interest rate should be raised by 25 basis points at least twice more.

Bond Market Swings on Fears of Further Tightening

AP-Yonhap News

The bond market swung sharply. The yield on the 2-year U.S. Treasury, which is sensitive to monetary policy, surged about 18 basis points that day to close at 4.73%. It was the largest one-day increase in 19 months. The 10-year Treasury yield also closed at 4.99%, near the psychologically significant 5% threshold. It briefly topped 5% during the session. In the bond market, prices and yields move in opposite directions.

Investors who had turned to safe-haven assets amid growing volatility in AI-related stocks have suffered unexpected losses, Bloomberg reported. Earlier, as volatility in big tech stocks increased, investors had expanded their Treasury purchases or reduced bets on falling Treasury prices.

CNN reported that markets are watching for the possibility that the Fed could raise rates faster than initially expected. In a report, Vail Hartman, a U.S. interest rate strategist at BMO Capital Markets, noted, “In response to October economic data and hawkish remarks from Fed officials, the market is reassessing whether the Fed needs to accelerate the pace of monetary policy tightening.”

There were also calls for caution. Stephen Stanley, Santander’s chief U.S. economist, maintained his existing forecast that the Fed would raise the benchmark interest rate by 25 basis points in December. He said the possibility of a 50-basis-point hike mentioned by Waller was unlikely to reflect a consensus view within the Fed. However, he added, “If inflation data do not improve over the next few months, our existing forecast that there will be no further tightening in 2027 could be put at risk.”

This content was produced with the assistance of AI translation services.