Federal Reserve Governor Christopher Waller said a 50 basis point rate hike in December may be needed if the core CPI reading comes in at 0.3% or higher month-on-month in the October report. Waller added that a 25 basis point hike would be warranted even if October inflation proved better than September's. That makes the core month-on-month figure the number to watch in the report: at or above 0.3%, his case for the larger move is triggered, while even a softer print still points to further tightening — and a 50 basis point step would double the pace of the smaller move he still considers warranted.

The remarks mark a drastic change of heart for one of the Fed's most influential governors. Waller has been a leading indicator of the central bank's policy direction since 2021, and while he was willing to give disinflation a chance back in September, he has now completely changed his mind.

Rate expectations repriced quickly after his comments. The probability of a December hike jumped to 99%, all but settling the question of whether the Fed acts and shifting attention to the size of the move. A hotter-than-expected CPI print could push the odds of a 50 basis point decision even higher.

The US CPI report takes centre stage as markets look to steady the ship after the midterm selloff. Wall Street forecasts point to cooler inflation, but the Fed may not blink — and with Waller having sketched out his response to either outcome in advance, traders now have a concrete yardstick for judging the print. With the Veterans Day federal holiday looming, any CPI-driven fireworks may fizzle out. Wall Street's relief rally is looking good, but what happens next remains the key question for investors.

Market snapshot

It would have been a relatively quiet session if not for Waller's hawkish remarks.

• S&P 500: up 0.07% at 7,579.25
• US 10-year Treasury yield: up 1 basis point at 4.892%
• WTI crude oil: down 1.59% at $85.45
• Gold: down 1.52% at $4,075
• Bitcoin: down 0.86% at $74,299
• FX: NZD leads, JPY lags

WTI crude lost ground on renewed hopes for a US-Iran deal, though a concrete breakthrough is not in sight yet. Gold held near recent highs as markets awaited the CPI report and progress on Iran. Bitcoin stayed under pressure ahead of the inflation print, while Zcash remained stuck in a range as macro headwinds continued to limit the upside. European stocks rallied across the board as market optimism grew, and the Nasdaq's comeback attempt showed breadth, though questions remain over its staying power.

Attention also turns to upcoming earnings, with NVIDIA's results preview in focus and Applied Materials under the spotlight as investors watch for cracks in the AI spending boom. As a major supplier of chipmaking equipment, Applied Materials is closely watched as a bellwether for the hardware spending behind the AI build-out.

US-Iran talks

There were no fresh developments on the US-Iran front after the previous day's positive headlines. It was reported that meetings between President Trump, Vice President Vance and the Qatari prime minister were positive, with the parties discussing ways to progress talks with Iran.

Trump said after the talks with the Qatari prime minister that Qatar would rather see a peaceful solution with Iran, but that the US is ready for strikes if necessary.

It was also reported that the US has allowed a small amount of uranium enrichment inside Iran, which Tehran agreed to, and that a preliminary agreement on reducing uranium enrichment is likely. No concrete breakthrough has been achieved yet, and the longer the stalemate drags on, the higher the probability that oil prices rise again. The marker to watch next is whether the reported preliminary agreement is confirmed, which would amount to the concrete breakthrough that has so far eluded both sides.

Source: investingLive European news wrap