Fed May Hike Rates Three Meetings in a Row as Inflation Refuses to Cool

Inflation isn't cooperating, and Wall Street is repricing what the Federal Reserve does about it. BofA Global Research U.S. economist Aditya Bhave expects policymakers to lift the Fed's benchmark rate by 0.25 percentage points at each of the central bank's next three meetings, in December, January and March. TD Securities analysts now predict the same three-straight quarter-point path, upgrading their prior forecast of two hikes.

The trigger: October's Consumer Price Index climbed 0.4%, hotter than expected. It was the third consecutive month that prices rose faster than forecast, and TD Securities said the pressure wasn't concentrated in one or two areas. 'Inflation is not trending in the right direction,' the firm wrote Friday in a note to investors, adding that price pressures 'appear to be broadening.'

Markets are already leaning that way. Interest rate traders put the odds of a quarter-point hike at the Fed's Dec. 8-9 meeting at nearly 90%, according to CME FedWatch, and see a better-than-even chance of another at the Jan. 26-27 gathering. Some officials want to go bigger. Fed Governor Christopher Waller said at a London conference Tuesday that policymakers should consider a 0.50 percentage-point increase in December, warning a smaller move 'would put our credibility at risk.'

EY-Parthenon chief economist Gregory Daco is penciling in hikes for December and January, and he told CBS News the pain lands on households. 'For any borrower, this will mean a high cost of borrowing for any type of consumer loan people take out,' Daco said. He added that a higher federal funds rate trajectory generally means higher long-term interest rates, pushing up borrowing costs across the country.

Two forces are keeping the heat on, according to Daco: high energy prices and heavy corporate spending on data centers and other equipment used to power AI. In a report, he warned those pressures 'could keep inflation elevated into 2027 and weigh further on household purchasing power.' The Fed's stated target remains 2% annual inflation.