WatcherGuru
Bank of America warned that the Federal Reserve could raise interest rates by 50 basis points in December after the consumer price index came in higher than expected. The warning describes a possible policy response, not a Fed decision.
Why it matters
The CPI is a closely watched measure of inflation, and an unexpectedly high reading can complicate the Fed's efforts to bring price growth under control. A 50-basis-point increase would add half a percentage point to the policy rate.
Market impact
Higher interest rates increase borrowing costs and can weigh on valuations for risk assets. Investors will be watching the Fed's December decision for its response to the inflation reading.
Frequently asked questions
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What prompted Bank of America's warning?
The bank warned of a possible rate increase after the consumer price index came in higher than expected.
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How much is a 50-basis-point rate increase?
A 50-basis-point increase adds half a percentage point to the policy rate.
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Has the Fed decided to raise rates in December?
Bank of America's warning describes a possible policy response, not a Fed decision.
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Why does the CPI reading matter to the Fed?
CPI is a closely watched measure of inflation. An unexpectedly high reading can complicate the Fed's efforts to bring price growth under control.
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How can higher interest rates affect risk assets?
Higher rates increase borrowing costs and can weigh on risk-asset valuations.
Benjamin Cowen
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