U.S. inflation data for October was higher than market expectations, and coupled with hawkish signals from Federal Reserve officials, market expectations for an interest rate hike in December further increased. Bitcoin (BTC) fell to an 11-week low after the opening of U.S. stocks on Tuesday, once falling below $73,000.
October CPI higher than market expectations
Data released by the U.S. Bureau of Labor Statistics (BLS) showed that the Consumer Price Index (CPI) increased by 0.4% monthly in October, higher than market expectations of 0.3%, but lower than the 0.6% increase in September. Core CPI (excluding food and energy) increased by 0.3% monthly, which was the same as the previous month and higher than market expectations of 0.2%.
Due to the inability to collect relevant data during the U.S. government shutdown in 2025, the Bureau of Labor Statistics did not announce the annual CPI growth rate this time. Therefore, the market can only observe inflation changes through the monthly increase.
In terms of details, the housing index increased by 0.3% in October, accounting for more than 30% of the overall CPI increase that month; food prices increased by 0.5%, of which food at home increased by 0.4%, and the price of eating out increased by 0.5%. The energy index rose 0.7%, much lower than September's 5.2%, indicating that the power of energy prices to boost overall inflation has weakened.
However, economist Robin Brooks believes that the overall details of the report are still disappointing. He pointed out that October was the peak of the second wave of large-scale oil price shocks this year, and rising energy costs may further be transmitted to core inflation, causing price pressures to persist.
Chances of raising interest rates in December heat up, U.S. bond yields rise
Before the release of the inflation data, Federal Reserve Board Governor Christopher Waller had spoken earlier on Tuesday, saying that even if inflation cooled down from September, he would still support an interest rate hike of 25 basis points in December. If the inflation data is significantly stronger, the Fed may even consider raising interest rates by 50 basis points.
CME FedWatch data shows that before the CPI was released, market expectations for a 25 basis point interest rate hike in December once reached 96.3%. After the data came out, the market further adjusted its judgment on monetary policy, expecting an 85.3% chance of a 25 basis point interest rate hike, and a 14.7% chance of a 50 basis point interest rate hike.
The bond market also quickly reflected expectations of interest rate hikes. The U.S. 10-year Treasury bond yield rose 6.5 basis points to 4.93%, while the 2-year Treasury bond yield, which is more sensitive to interest rate policy, surged 14 basis points to 4.69%, reflecting that traders began to factor in the possibility of a sharp interest rate hike by the Federal Reserve.
Bitcoin came under further pressure, falling to about $72,700 amid expectations of tightening interest rates.
Tech stocks under pressure, market focuses on Nasdaq selling pressure
U.S. stocks are also affected by expectations of inflation and interest rate increases. The Nasdaq Composite closed down 0.74%, but technology stocks overall remained under pressure. Nvidia shares fell about 5.5% as the market also focused on the company's board of directors launching an independent investigation into whether CEO Jen-Hsun Huang was targeted by foreign intelligence agencies.
Mosaic Asset Company, a trading research firm, pointed out that U.S. inflation continues to be higher than the Federal Reserve's 2% target, and the October employment report shows that the labor market is still resilient, which has reduced market concerns about an economic slowdown and increased the room for the Federal Reserve to maintain tightening policies.
However, the agency also observed quite extreme selling pressure on Nasdaq, including the stock put/call volume ratio (Put/Call Ratio) climbing above 1, even higher than the level in April 2025 when the trade war triggered a market sell-off.
Mosaic believes that this type of extreme risk aversion may also mean that market selling pressure is approaching its peak, providing another possibility for Nasdaq to form a long-term bottom.
Overall, although inflation cooled down in October compared with September, core price pressures were still higher than expected, and the labor market remained resilient, making it less likely that the Fed would turn to easing in the short term. The market will next pay close attention to the December interest rate decision and the further impact of the high interest rate environment on risk assets such as technology stocks and Bitcoin.
