A 0.5 Percentage Point US Policy Rate Hike in December (Month 12), All at Once?
An independent exercise, not a statement by the video creator or verification of every claim in the video.
How much does a higher chance of a 50bp hike change expectations?
As a hypothetical example, allow only a 25bp or 50bp hike. Raising the probability of a 50bp move from 20% to 60% lifts the expected hike from 30bp to 40bp, an increase of 10bp. With the same 50bp scenario, the effect of new information depends on how much markets had already priced in.
Check for yourself
- Do interest-rate futures of the same maturity show a change in expectations immediately before and after the CPI release?
- How would allowing for an unchanged rate affect the expected hike in this example?
Limits of application
The probabilities and weighted averages are illustrative. Actual futures prices can reflect expectations for multiple meetings as well as risk premia.
- What to look for
- Follow how inflation releases and policy remarks feed into rate expectations, and why usage and revenue at an AI company can grow at different rates.
- Why it matters
- Separate released figures, expectations, and official decisions in rate news. When assessing company projections, check token usage, realized prices, and compute costs individually.
Timeline
4 segmentsThe Bureau of Labor Statistics reported seasonally adjusted monthly increases of 0.4% for headline CPI in 2026-10 and 0.3% for core CPI. Before the release, Fed Governor Waller said a 50bp hike at the year-end meeting should be considered if core CPI came in around 0.3% or higher. The video interprets this as a reason markets reassessed the likelihood of a hike.