The Fed expected rate cuts this year. Now it’s bracing for another inflation fight

The most recent inflation reading for October had beaten expectations, coming in at 0.4% for the month.

At the start of the year, the Federal Reserve was sanguine about the American economy.

Economists projected the central bank could lower rates .

Instead, the central bank was forced to raise rates in September for the first time since 2023, hiking 25 basis points as inflation, which has run above the Fed's 2% target for more than five years , reemerged as its bugbear.

As the Federal Open Market Committee's final meeting looms on Dec. 8, October's inflation reading was higher than expected : 0.4% month-on-month versus the 0.3% predicted in a Dow Jones survey of economists.

So-called core CPI increased 0.3% against a 0.2% forecast.

Almost 88% of traders expect another 25-basis-point hike next month, according to the CME Fedwatch tool .

"We've got a real inflation issue on our hands that has been developing," Chicago Federal Reserve President Austan Goolsbee said in an interview with "PBS NewsHour " on Tuesday, adding that prices are "on everyone's mind" and calling inflation readings "borderline disturbing.

Fed Governor Christopher Waller said Tuesday that a hot inflation report could push him toward advocating for a half-point increase in December, adding this should be on the table if core CPI were "around 0.3%.

"We continue to expect the Fed to hike rates by 100 bps with the next increase coming in December and quarterly thereafter," Sockin added.