Hotter-Than-Expected Inflation Data Has Investors Betting on a Rate Hike

Inflation came in hotter than expected last month, raising questions about how quickly the Fed will look to hike rates. Speaking of rising prices, why expensive beef is probably here to stay. You have demand for beef at an all-time high. You have fewer cattle. So that's created a situation that's just driving prices higher and higher. And congressional Democrats are already getting started on their agenda and putting some of the biggest names in corporate America on notice. It's Tuesday, November 10th. I'm Alex Ocellef for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Prices continued to climb in October. Data out from the Labor Department today showed that consumer prices rose 0.4 percent last month. Over the past three months, prices have risen at an average of $1.5 billion. That's an annualized pace of 5.7 percent. That's well above the 2 percent rate that the Fed targets. For more, I'm joined now by WSJ economics reporter Matt Grossman. Matt, now, we should note that no annual inflation rate was published because none was collected last year because of the government shutdown. But a WSJ analysis found it probably rose 4 percent. How did you guys find that? We basically took an average of how high prices were last September versus last November. If you kind of take the midpoint, you get a good sense of how high prices probably were in October 2025. And that 4 percent increase is basically the difference between those numbers. What's driving this inflation? I mean, higher fuel prices has kind of been the name of the game for a while. But are we finally starting to see that really spread throughout the economy? Yeah, that's exactly why a lot of economists saw today's report as more concerning. Gasoline prices were only up about 1 percent seasonally, adjusted over the month. But there were a lot of other categories that were still problematic. Some of the goods that are closely related to the AI investment boom are really going up in price. So there's a lot of price pressure around electronic components. And people saw that in television prices last month, which were up 3.3 percent from just a month earlier. Phone prices, which were up more than 1 percent from a month earlier. Those sound like pretty small numbers. But when prices go up, that is really setting them up to rise quite a bit over the course of a year. Right. And we've been seeing that effect since inflation has been above the Fed's target rate of 2 percent for years now. Given this, along with the strong jobs report, it seems likely that the Fed will raise rates at its next meeting in December. Could they do it maybe more quickly than investors might have expected before, more than a quarter percentage point? After the data came out, the president of the Dallas Fed, Lori Logan, said she's thinking about whether the Fed might need to move a bit faster. And at this point, moving faster would basically mean a half point rate increase in December as opposed to a quarter point rate increase. If we get that half point rate hike in December, the next question is going to be, well, is that in addition to the hikes that we'd get next year anyway? Or are we basically just doing one of those 2027 rate hikes earlier than we would have? That was Journal Economics reporter, Matt Grossman. Thank you, Matt. Thank you. The hotter than expected inflation data sent bond yields higher today. The 10-year Treasury benchmark briefly touched 5 percent, while the two-year yield had its biggest jump in more than a year. Stocks traded lower, led by the Nasdaq, which was down 0.7 percent. Shares of Nvidia extended yesterday's losses and fell 5.5 percent. Speaking of public companies, Anthropic is moving ahead with its IPO. And it's seeking a valuation of about $1.3 trillion. As part of the IPO, its seven founders plan to cash out about $250 million each, leaving them with stakes that are each worth about $18 billion. Anthropic is meeting with prospective investors this week, and shares are expected to start trading next week on Thursday. Well, as we discussed at the top of the show, prices just keep rising. But we're honing in on one area in particular that's really bothered people, and the Trump administration. Beef prices. The prices of steaks and hamburgers are hitting record highs, and they may stay high for years to come. For more, I'm joined by Patrick Thomas, who covers food and agriculture for The Journal. Patrick, we've been hearing for a while now about how the U.S. cattle herd has been shrinking, and that's contributing to these high prices. What's been making it so small? Ranchers' financial conditions coming out of the pandemic and drought in 2022. Those two things put ranchers in such a terrible financial state, that they really cut back on their herds and didn't rebuild. We have our lowest level in more than seven decades. And so that's kind of putting meatpackers in a bit of a crunch, right? Yeah, that's right. You've seen Tyson close a lot of its plants. They closed a massive one in Lexington, Nebraska, one in Illinois. They plan to sell another in Washington. So the result of all this is we just don't have enough beef. What are some of the solutions being floated to fix this? Long term, the industry will tell you, well, it just takes time. Washington, they want things done a little bit faster. So we've seen attempts to throw money at smaller meatpackers, increase capacity, resuming imports of Mexican cattle, which had been cut off from a New World screwworm parasite, and they opened the border to resume that. Importing more beef in general, the Trump administration has said, it wants to up that from Brazil and Argentina, and that is a very controversial policy with ranchers. It really seems like the U.S. is going to have to do something about it. It really seems like beef is this symbol of the pain of inflation. It came up during the midterms in this unexpectedly close Mississippi Senate race. There was this one ad that went viral from Democratic challenger Scott Colombe. The ad's making fun of Republican incumbent Cindy Hyde-Smith, who said earlier this year that people have, quote, so many proteins to choose from. Here's the ad. Gone price of beef continuing to go up. You know, you have so many proteins to choose from. Pick another protein? Shit, I'd rather pick another. Senator, I say it. So, Patrick, is there any sign of a demand change here because of high prices? Like, are people choosing other proteins? Not really. People really do love beef, and people don't want to eat chicken every single night. Beef is kind of inelastic. We've seen a little bit of increase, but by and large, people are not picking other proteins, and I think that message resonated for that reason. That was journal reporter Patrick Thomas. Thanks, Patrick. Thanks so much for having me. Coming up, the Iran war brings some good news for people worried about global emissions, and House Republicans pick their new leader for the next Congress. More after the break. As the Iran war has raised energy costs around the world, it's done something else kind of surprising. It's lowered the world's carbon dioxide emissions. That's according to a new analysis from a consortium of climate scientists, which said that fossil fuel emissions should fall this year by 0.4 percent to about 38 billion metric tons. In the past 40 years or so, we've only seen big drops in global emissions during steep economic slowdowns, like in the early 90s during the breakup of the Soviet Union, the COVID-19 pandemic, things like that. But this year, while oil prices have jumped, that hasn't really hurt economic growth much, which has surprised companies and economists. That shows that countries are relying less on fossil fuels and more on renewable energy. British police. have arrested a senior member of the U.S. Army on allegations of spying for Russia. The 41-year-old man was arrested near Gloucester today. That area is home to Britain's Intelligence and Cybersecurity Agency and the NATO-allied Rapid Reaction Corps. A spokesperson for the U.K. police said the arrest was the result of a close collaboration with U.S. authorities. Counterterrorism police also said the arrest wasn't linked to any other act of investigation, which suggests it's not related to the recent incident near the RAF Fairford Air Base in England. This morning, Defense Secretary Pete Hegseth held a press conference defending himself against pending impeachment charges. It follows Kentucky Republican Thomas Massey's introduction of articles of impeachment in the House yesterday. Throughout his speech, Hegseth aligned himself closely with President Trump. Hegseth drew parallels between his impeachment fight and Trump's own struggles with lawmakers years earlier. As we noted on yesterday's show, Massey has alleged that Hegseth unlawfully denied the Iran War and ignored a resolution from Congress to pull troops from the conflict. Another point Massey and other lawmakers have criticized Hegseth for are the strikes on suspected drug boats in the Caribbean and Eastern Pacific. They allege that the strikes violate the laws of war. Hegseth says questioning those strikes is an attack on the troops. Put the secretary on trial today and the men and women who carried out those orders tomorrow. If they want to come for the war, they have to come for the war. They're going to have to come through me. The House is set to vote this evening on whether or not to advance to an impeachment vote. Visit WSJ.com for the latest. In other political news, House Republicans have elected Ohio Representative Jim Jordan as their leader for the next Congress. Jordan defeated current Majority Leader Steve Scalise in a secret ballot vote, showing that House Republicans are embracing new blood after the losses in last week's midterms. Meanwhile, on the Senate side, House Republicans have elected Joe Biden as their leader for the next Congress. side, John Thune won another term as majority leader next year. Democrats are also making moves ahead of the new Congress. They've already gotten started on their plans to investigate some of the biggest names in corporate America, even before they've taken office. Companies, of course, knew this might happen, and they're getting ready for the coming legal challenges in earnest. Journal Legal Affairs reporter Louise Radnovsky has been looking into it. Louise, Democrats and congressional committees they'll lead have sent letters to companies saying that they need to produce records due when the next Congress convenes in January. What are lawmakers looking for? Committees have shown that they have a wide range of interests already. But one thing that is emerging top of the list is companies that have supported President Trump through his pet projects, the Freedom 250 celebrations, his bull room. And companies can find themselves in sightlines of investigators for a couple different reasons. One is that they are themselves the target of the investigation. But the other is that in some cases they may just be an easier way to get access to information about what happened on the government side of things. Some of the companies that are now in the crosshairs of these lawmakers. Household names, Apple, Amazon, Walmart, Toyota. In some cases, it's over something general like the bull room or a sponsorship of Freedom 250. The Senate Banking Committee's been interested in ways in which consumers have potentially been affected. So they've included banks in their range of inquiries. So, of course, no company wants this kind of attention. How are they preparing for the prospect of being under scrutiny? By lawmakers. I mean, they're hiring these law firms. What are these law firms helping them to do? There were companies that started getting ready months ago, retaining their preferred law firms or looking to their existing law firms, congressional investigations practices specifically. And then that really became a rush starting Wednesday morning. And we heard from lawyers who were suddenly getting retainers signed and returned to them after clients have been sitting on them for weeks. We've also heard from. Lawyers and executives that companies are starting to take some of the steps that they've been advised to do by their counsel, assessing their exposure, interviewing key employees, even in some cases running war games style simulations in their boardrooms. So can we expect this to really kick off in earnest when the new Congress is in session in January? They have expertise that they have built up over the last couple of years while they've been in the minority, and they have made very clear that they literally cannot wait. Part of why Democrats are moving so quickly is that they do know from being in the House majority during a previous Trump administration that they have a very narrow window of time really to move, about 12 months to land any punches that they're hoping to throw. That was Journal Legal Affairs reporter Louise Radnovsky. And that's what's news for this Tuesday afternoon. Today's show was produced by Danny Lewis and Anthony Bansi with supervising producers Tali Garbell and Melanie Roy. I'm Alex Oseleff for The Wall Street Journal. We'll be back with a new show tomorrow. Thanks for listening.