28.5 basis points. That is the December tightening priced into Fed funds futures by Wednesday morning, per Deutsche Bank, 3.5 basis points past a full quarter-point hike. A 25bp move at the December 8-9 meeting is now fully priced, with futures carrying a 14% chance of a 50bp move, the bank's Henry Allen wrote in a note carried by FXStreet.

The dollar index answered with a second straight day of gains, up 0.1% on Wednesday to 102.29, per Reuters, after a 0.5% jump on Tuesday. The index now sits just above its November 6 close of 102.26, the day payrolls beat forecasts by 100,000. The euro and the pound took the other side. As of 09:13 UTC: euro 1.1146, down 0.68%; sterling 1.3319, down 0.91%; dollar-yen 158.83, up 0.54%, per the MarketRadar snapshot.

The trigger was Tuesday's October CPI report. Headline prices rose 0.4% on the month, above the 0.3% forecast, and core prices rose 0.3% for a third straight month, above the 0.2% forecast, per the Bureau of Labor Statistics. No 12-month rate exists: October 2025 prices were never collected during the funding lapse. Hours before the release, Fed Governor Christopher Waller had tied a half-point December move to the core number: 0.3% or above, and 50bp belonged in the discussion, per Reuters. October's core print met that line exactly.

Five moments that repriced the Fed

  • Friday, November 6: October payrolls rise 165,000, against a 65,000 consensus, with unemployment at 4.1%. The dollar index jumped 0.77% to 102.26 after the jobs beat, its largest daily gain since June 17, per Reuters.
  • Tuesday morning: Waller, speaking in London, backs a December hike even if inflation cools and leaves a half-point move open if the core print runs hot, per Reuters.
  • At 13:30 UTC on Tuesday, October CPI lands hot: headline 0.4%, core 0.3%. The dollar index gains 0.5% on the day. Two-year Treasury yields jump 18 basis points overnight and the 10-year reaches 4.996%, up 13.8 basis points, per Reuters.
  • By Tuesday evening, Dallas Fed President Lorie Logan calls inflation above target "unacceptable" and says the Fed needs "at least two more rate increases, each of 25 basis points," per Reuters. Goldman Sachs adds a March 2027 hike to its forecast, taking the funds rate to a 4.25-4.5% peak, per chief US economist David Mericle.
  • Wednesday morning brings the tally: December pricing reaches 28.5 basis points, up from 21.0 on Monday and 27.7 at Tuesday's close, per Deutsche Bank. The rate priced for September 2027 rises 22.3 basis points in a day, nearly a full extra hike on next year's path. The bank's own economists add a January hike to their profile.

Why it matters

The repricing reaches past the dollar. Gold traded at $4,056.1 as of 09:13 UTC, down 0.52% after falling 2.67% to $4,030.8 on the CPI print, and bitcoin sat at $73,697, down 0.75%, per the MarketRadar snapshot. The December 8-9 FOMC meeting now frames a choice between 25bp and 50bp; a pause is priced out entirely. Reuters counts three quarter-point moves priced in by mid-2027. The euro sits 2 pips above 1.1144, its November 6 close, trading at 1.1146. Sterling sits 36 pips below 1.3355, its November 6 close, trading at 1.3319. Dollar-yen sits 40 pips above 158.43, its November 6 level, trading at 158.83.

What to watch

  • November PPI on November 13, the last inflation read before the December meeting
  • RBA minutes on November 17, after the bank's November 3 hike to 4.85%
  • November CPI on December 10, one day after the December 8-9 Fed meeting
  • Whether more Fed speakers join Waller on 50bp
  • EUR/USD 1.1104, the 17-month low from October 29, if the dollar keeps rising

Key points

  • Dollar index 102.29 on Wednesday, up 0.1% after a 0.5% Tuesday gain, per Reuters
  • December pricing hit 28.5 basis points Wednesday morning, up from 21.0 on Monday, per Deutsche Bank via FXStreet
  • A 25bp December hike is fully priced; futures carry a 14% chance of a 50bp move
  • October CPI: headline 0.4%, core 0.3%, both above forecasts; core met Waller's 0.3% line for 50bp
  • Deutsche Bank's economists added a January hike; Goldman Sachs added a March 2027 hike, peak 4.25-4.5%

MarketRadar take

The market has stopped asking whether the Fed hikes in December; it now asks by how much. That shift, priced across four sessions since the jobs beat, keeps the dollar bid while the 50bp chance sits at 14%. The number to watch is January pricing, not December: Deutsche Bank's economists have already moved there, and CME FedWatch gives a second January hike better-than-even odds, per Reuters. If November PPI runs hot on Friday, the 50bp debate moves to the market's center.