October Inflation Tops Forecasts, and Deutsche Bank Adds January Rate Hike
Key Facts
Deutsche Bank added a 25-basis-point increase in January 2027 to its forecast for the U.S. interest-rate path, after data showed the consumer price index rose 0.4% in October, above economists’ estimate of 0.3%. The bank had previously expected two increases, in December and March, and now projects three increases from December through March. Reuters reported that the bank said price gains were broad-based, reinforcing its earlier concerns about persistent inflationary pressures. The change comes after the Federal Reserve held rates steady at its latest meeting, amid inflation it described as still elevated. In the market, the probability of a December rate hike stood at about 99%, according to the CME FedWatch tool, as reported by Reuters.
The seasonally adjusted Consumer Price Index for All Urban Consumers rose 0.4% month over month in October, following a 0.6% increase in September. The index for all items excluding food and energy rose 0.3% for the month, indicating that pressures were not confined to volatile components alone. The shelter index rose 0.3%, accounting for more than 30% of the monthly increase in the all-items index. The food index also rose 0.5% and the energy index 0.7% during the month. These components provide a more detailed picture of the sources of the increase, while the reading’s surpassing the Reuters estimate was an additional factor in Deutsche Bank’s revision to its projected path.
Deutsche Bank said, according to Reuters, that October’s data showed “broad-based gains” and reinforced concerns it had raised earlier in the year about persistent price pressures. This assessment places the latest inflation reading in the context of the bank’s debate over how persistent pressures are, rather than treating it as an isolated increase in a single category. Annual inflation had reached 3.7% in the 12 months ended in September, compared with 3.4% in the period ended in August. In September, the energy index rose 5.2%, according to data from the Bureau of Labor Statistics. September’s reading provides earlier context for the price path, while October’s monthly figures were the latest signal the bank addressed in updating its forecast.
At its October 28 meeting, the Federal Reserve kept the target range for the federal funds rate at 3.75% to 4%, and the statement was approved by a 10-to-2 vote. The two dissenting members favored a quarter-percentage-point rate increase, signaling a split within the committee over the appropriate next step. The central bank described economic activity as expanding at a solid pace, said domestic spending had shown resilience, and said inflation remained elevated. This backdrop aligns with policymakers’ continued focus on the price path, as the December decision has become a focus for the market. Federal Reserve Governor Christopher Waller said the central bank should raise rates by at least 25 basis points in December even if inflation recedes, adding that accelerating price pressures could warrant considering a half-percentage-point increase.
The next near-term official measure of price pressures is the October Producer Price Index, scheduled for November 13, 2026, at 08:30 a.m. The Federal Reserve will hold its next meeting on December 8 and 9, when market expectations for a possible increase will be tested. The following meeting is scheduled for January 26 and 27, 2027, the month to which Deutsche Bank added an increase in its projected path. The next Consumer Price Index reading, for November, is scheduled for release on December 10 at 08:30 a.m. Eastern Time. These dates follow October’s data, which prompted the bank to revise its forecast, while subsequent readings and decisions will provide the next milestones in assessing the path of prices and interest rates.