---
title: Inflation expectations are falling. Rate expectations are rising.
description: After the November midterms, markets priced lower inflation and higher rates at the same time. The October CPI report is why, and the Fed's December meeting is where the contradiction gets resolved.
canonical: https://hangingcontext.com/stories/2026-11-14/fed-inflation-expectations-diverge/
last-updated: 2026-11-14
url: https://hangingcontext.com/stories/2026-11-14/fed-inflation-expectations-diverge/
published: 2026-11-14T01:19:09Z
edition: 2026-11-14T00
newsroom: finance-investing
beat: None
trust: confirmed
source_count: 5
cited_manifest_ids: ['1794609334118433554', '1794606581168418815', '1794593741445324372', '1794612107503443899', '1794603485078394556']
---

# Inflation expectations are falling. Rate expectations are rising.

*After the November midterms, markets priced lower inflation and higher rates at the same time. The October CPI report is why, and the Fed's December meeting is where the contradiction gets resolved.*

Confirmed · 5 Manifests · Finance & Investing · Published 2026-11-14 01:19 UTC

## Key facts

- The one-year inflation swap fell from 2.44% the day before the November election to 2.16% the day after, and to 1.94% by November 9. [cites: 1794609334118433554]
- October CPI rose 0.4%, above the 0.3% expected, with core inflation also up 0.3% — the third consecutive monthly reading of 0.3%. [cites: 1794609334118433554, 1794606581168418815]
- The gap between one-year inflation pricing and the expected federal funds rate has widened to about 2.6 percentage points, with the expected rate twelve months ahead climbing toward 4.8%. [cites: 1794609334118433554]
- Nomura now projects hikes in December and March; Bank of America projects three consecutive hikes in December, January and March. [cites: 1794593741445324372, 1794612107503443899]

## Two markets, opposite directions

The week after the November midterm elections produced a split that rarely survives contact with reality. The one-year inflation swap fell from 2.44% the day before the election to 2.16% the day after, and by November 9 it had declined to 1.94%, according to DoubleLine. Energy helped: West Texas Intermediate crude fell more than 8% in the two trading sessions following the election. On that evidence, inflation looked beaten. [cites: 1794609334118433554]

Then the October CPI report arrived and pointed the other way. Consumer prices rose 0.4% in October, above the 0.3% expected, and core inflation rose 0.3%. Goldman Sachs describes the 0.3% CPI print as the third consecutive month at that level, and calls it a number the Federal Reserve must reckon with. Two-year Treasury yields rose 17.6 basis points on November 10, according to DoubleLine, and the expected federal funds rate twelve months ahead climbed toward 4.8%. [cites: 1794609334118433554, 1794606581168418815]

The result is a gap of about 2.6 percentage points between what markets expect inflation to be in a year and what they expect the policy rate to be. DoubleLine notes that market pricing still expects CPI fixings to fall from about 4% in January to 2.3% by May — a forecast that sits uneasily next to the rate path the same market is pricing. One of those two expectations is wrong. [cites: 1794609334118433554]

> **From Synorb** — Ask what Synorb covers. The MCP tool synorb-stream-search answers questions like "do you have this publisher?" without using any Manifest allowance. [Connect and ask](https://synorb.com/connect/start)


## The forecasters keep adding hikes

The banks have been revising in one direction. Nomura added a March hike to its Federal Reserve forecast, now projecting increases in both December and March, driven by a hotter-than-expected October CPI report and uniformly hawkish rhetoric from Fed officials. Nomura's economists note that the share of CPI subcomponents increasing in October jumped sharply, indicating broadening inflation pressures. [cites: 1794593741445324372]

Bank of America went further, adding a hike to project three consecutive increases in December, January and March. Its strategists argue the October pause was a policy mistake, that recent 0.3% monthly inflation prints annualise to about 3.7% to 3.8%, and that the Fed is behind the curve by at least 100 basis points according to the Taylor Rule. PNC Economics, reading the producer price data, projects two more 25-basis-point hikes through early 2027. [cites: 1794612107503443899, 1794603485078394556]

The producer price data backs the hawkish turn. Final demand producer prices rose 0.3% in October, with year-over-year inflation reaching 6.5%, according to PNC Economics. Goods producer prices rose 0.5% in the month and are 10.2% higher than a year ago, services rose 0.2% and are 5.0% higher year over year, and transportation and warehousing costs rose 2.0% in October. Energy producer prices fell 0.1% in the month but remain 36.8% higher than a year ago. [cites: 1794603485078394556]

## Fifty basis points is on the table, and probably not on it

The most-discussed number in this debate is fifty. Fed Governor Christopher Waller indicated that a 0.3% core CPI reading would warrant consideration of a 50-basis-point increase, according to DoubleLine, and Goldman Sachs says Waller's comments have put 50-basis-point hikes back on the table. But Bank of America argues a 50-basis-point hike in December is unlikely, because it would make the October pause look political, and puts market pricing for that outcome at only about 10%. [cites: 1794609334118433554, 1794606581168418815, 1794612107503443899]

There is a self-correcting mechanism in the background that the hawks themselves acknowledge. Goldman Sachs notes that higher interest rates may create a self-balancing system by slowing the AI capital expenditure build-out, which in turn influences the Fed's policy path. Oil has already fallen about 15% in November, according to Goldman Sachs, which eases one source of price pressure even as the core numbers stay hot. The Fed goes into its December meeting with less information than usual, Bank of America notes, because the meeting was pulled forward by a week — and with two markets telling it opposite things. [cites: 1794606581168418815, 1794612107503443899]

## What is still unresolved

- Whether the December meeting delivers 25 basis points, 50, or nothing.
- Whether CPI fixings really fall from about 4% in January to 2.3% by May, as market pricing implies.
- Whether the 2.6-percentage-point gap between inflation pricing and rate pricing closes from the inflation side or the rates side.

## Decision card

- **Useful for:** Bankers positioning for the December Fed meeting; treasurers planning funding costs into 2027; investors reading the rates market
- **Not for:** Anyone looking for a prediction of the Fed's next move
- **Compare against:** October CPI and PPI prints; Nomura and Bank of America Fed forecasts

## Provenance ledger

| Manifest id | Title | Source | Claims used | Published |
|---|---|---|---|---|
| `1794609334118433554` | The Fed and Inflation Expectations Diverge | [doubleline-research](https://doubleline.com/markets-insights/the-fed-and-inflation-expectations-diverge) | 1794609649677435346, 1794609649680435347, 1794609649683435349, 1794609649684435350, 1794609649690435354, 1794609649691435355, 1794609649688435353, 1794609649681435348, 1794609649686435351, 1794609649687435352 | 11-13 00:00 |
| `1794606581168418815` | How Will Higher-than-Expected Inflation Data Impact the Fed's Next Rate Decisions? | [goldman-sachs-the-markets](https://mgln.ai/e/1720/traffic.megaphone.fm/GLD7615870516.mp3) | 1794606941775420434, 1794606941778420435, 1794606941782420437, 1794606941784420439, 1794606941786420440 | 11-13 00:00 |
| `1794593741445324372` | The Week Ahead - Our new Fed call | [nomura-week-ahead-podcast](https://nomurapodcasts.libsyn.com/the-week-ahead-our-new-fed-call) | 1794594022069330626, 1794594022071330627, 1794594022082330640 | 11-13 00:00 |
| `1794612107503443899` | Global Rates & FX Views: Rates Rollercoaster | [bank-of-america-podcast](https://bofaglobalresearch.podbean.com/e/global-rates-fx-views-rates-rollercoaster) | 1794612476954445043, 1794612476957445044, 1794612476958445045, 1794612476960445046, 1794612476961445047, 1794612476964445049, 1794612476963445048 | 11-13 00:00 |
| `1794603485078394556` | PNC Economics Research - PPI - 13 November 2026.pdf | [pnc-economic-reports](https://pnc.com/content/dam/pnc-com/pdf/aboutpnc/EconomicReports/EconomicUpdates/2026/PNC_Economics_Research_PPI_13_November_2026.pdf) | 1794603629399398038, 1794603629345398021, 1794603629351398023, 1794603629383398024, 1794603629385398026, 1794603629387398027, 1794603629393398030, 1794603629395398032, 1794603629396398034, 1794603629398398036 | 11-13 00:00 |

## Run these Manifests yourself

Every Manifest cited here can be read in full with your own Synorb Key. Check the claims before you rely on them.

1. **Get a Synorb Key.** Click Generate Free Agent Key at https://synorb.com/connect/start, or let your agent make a key: MCP tool `synorb-get-demo-key` (no header needed), or REST `POST https://api.synorb.com/api/connect/demo-key` with a JSON body such as `{"client":"your-agent-name"}`. The key is the `api_key` field of the answer. Save the key. The 72 Hour Agent Demo key needs no email. It lasts 72 hours and can pull up to 25 Manifests. It includes 5 Beacons; all of them are starter Beacons.
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3. **Check the claim.** Match each sentence in the story to the claims in the Manifest it cites. The claim ids in the ledger point to them.

Cited Manifest ids:

- `1794609334118433554`
- `1794606581168418815`
- `1794593741445324372`
- `1794612107503443899`
- `1794603485078394556`

```sh
for id in 1794609334118433554 1794606581168418815 1794593741445324372 1794612107503443899 1794603485078394556; do
  curl -s -H "Authorization: Bearer $SYNORB_KEY" "https://api.synorb.com/manifests/by-id/$id"
done
```

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---
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