One inflation print and one auction will decide the Fed's December move

The calendar constraint

On 28 October the Fed held its policy rate at 3.75–4.00% on a 10–2 vote. The two dissenters, Lisa Cook and Beth Hammack, wanted a 25-basis-point hike. The statement described inflation as elevated and made no mention of energy.

The next meeting runs on 8–9 December and comes with fresh economic projections. The BLS calendar puts October CPI on 10 November at 08:30 (16:30 TRT) and November CPI on 10 December. The committee will therefore set December policy on the strength of a single new inflation print; the November data arrive the day after the decision.

That timing lifts the weight of the 10 November release far above the norm. The consensus compiled by the Rio Times looks for a 0.3% monthly rise in October CPI, after 0.6% in September. Producer prices on 13 November could also colour the decision, but CPI is the number on which the market has built its December pricing.

The gap between headline and core

September CPI came in at 3.7% year on year, above the 3.6% expected, while core inflation was only 2.6%. Energy accounts for the 1.1-point gap: energy prices rose 5.2% on the month in September and petrol 9.1%. The Fed's tightening debate therefore rests less on core prices than on second-round effects, the risk that energy costs feed into wages and service prices.

The October jobs report fed that worry. Non-farm payrolls rose by 165,000, double the 59,000–65,000 consensus. Unemployment slipped from 4.2% to 4.1%, and the previous two months were revised up by a combined 84,000. Average hourly earnings grew 3.1% a year, below 3.7% inflation, which means household real incomes are still falling.

Energy prices, however, turned in November. January ICE Brent futures closed 6 November at 97.75 dollars. October CPI will not capture that easing; the November figure released on 10 December will. On 9 December the Fed may thus have to act on backward-looking data against a shock that is already fading.

What the curve is saying

The front end is pricing the Fed; the long end is pricing something else. Trading Economics shows the 2-year yield up 5 basis points on 6 November at 4.52%, yet 0.25 points lower over the month. The 10-year closed the same day at 4.867%, down 0.43 points on the month. On these figures the 10s–2s spread narrowed from about 53 basis points to 35 within a month.

Two forces stand out in dragging the long end lower. Softer Brent in November eased inflation expectations, and the 5–6 November tech sell-off brought safe-haven demand into Treasuries. Gold nonetheless ended the week of 6 November more than 4% higher and stood at 4,061.81 dollars an ounce on 8 November. A rally in gold despite a firm dollar and hike expectations suggests investors are hedging growth and asset-price risk rather than the rate path.

That backdrop puts the 10 November evening auction to the test. On 4 November the Treasury announced a 125-billion-dollar quarterly refunding that raises about 28 billion dollars of new cash from private investors. If a hot CPI at 16:30 pushes the front end up, the 42-billion-dollar 10-year sale at 21:00 will reprice the term premium, the extra yield investors demand to hold longer-dated debt, that very evening. With the US bond market shut on 11 November for Veterans Day, the reaction may spill into the 30-year auction on 12 November.

The rest of the week's calendar

US data do not stand alone. On the Rio Times calendar, Mexico publishes October inflation on 9 November at 15:00 TRT, with 0.5% month on month expected. Brazil's annual inflation follows on 12 November at 15:00 TRT, expected at 4.7%. UK third-quarter GDP comes the same day at 10:00 TRT, and US producer prices on 13 November at 16:30 TRT.

In Latin America the Fed decision transmits through the currency. Mexico's monthly inflation was 0.42% the previous month and is expected to rise to 0.5%. A hot US CPI would narrow the rate differential between the United States and Mexico, which is in an easing cycle, and leave the peso more sensitive to the 9 November print.

Europe and the dollar leg

On the euro side the calendar trails the Fed. The ECB holds its policy meeting on 16–17 December, eight days after the Fed. EUR/USD stood at 1.1142 on 8 November, down 0.52% over the month, with the dollar index at 102.22. If the Fed hikes, a possible ECB move would not close the rate gap; it would only stop it widening.

Germany's borrowing calendar falls in the same week. The Bundestag budget committee finalises the 2027 budget at its last session on 12 November; the draft sets spending at 555.44 billion euros and lifts net borrowing from 97.96 billion to 118.73 billion euros. The final vote is on 27 November. If high US yields meet heavier Bund supply in the same month, the European long end could stay under pressure whatever the Fed decides.

For Türkiye the channel runs through the dollar and global benchmark rates. A return of the US 10-year above 5% would directly raise dollar funding costs for emerging-market issuers. If the yield stays below 4.8%, the December window remains open for treasuries with external debt to roll.