During the Asian session on Thursday (November 12), the dollar index fluctuated higher, briefly touching 103.08, its highest level since early April 2025.
On Tuesday (November 10), data released by the U.S. Labor Department showed that the October consumer price index rose 0.4% month-on-month, above economists' expectation of 0.3% but below September's 0.6% gain. Core inflation, which strips out volatile food and energy prices, rose 0.3% month-on-month, above the market expectation of 0.2%, while the market had originally expected the figure to be unchanged from September.
Deutsche Bank now expects the Federal Reserve to raise rates at three consecutive meetings, adding a January hike to its forecast after the hotter-than-expected U.S. inflation report. The bank expects 25 basis point hikes in December, January and March. That would push the federal funds target range from the current 3.75% to 4% up to 4.50% to 4.75%.
Revised forecast: from "December and March, pause in January" to three consecutive hikes
Deutsche Bank's previous baseline path was a 25 basis point hike in December and March, with the January meeting on hold. That framework was completely rewritten after the October consumer price report. The report showed headline CPI rose 0.4% month-on-month, clearly above the market expectation of 0.3%, and more importantly, the increase showed clear "breadth" — it was not driven by a few volatile categories alone, but by simultaneous increases across multiple components including food, housing, services and core goods. Deutsche Bank concluded that inflationary pressure had shifted from "a disturbance within a phased decline" to "a still-sticky and broadening trend," which removed the basis for the earlier assumption that "January could be safely skipped." Three consecutive hikes mean the policy path shifts from "intermittent tightening" to "sustained pressure," with the federal funds target range rising from the current 3.75%–4.00% to 4.50%–4.75%. This revision not only reflects the shock of a single month's data, but also embodies the institution's reassessment of inflation persistence: when price increases are no longer confined to a few areas, the necessity for the committee to maintain a hiking pace at consecutive meetings rises significantly, and the pause option is therefore removed from the baseline scenario.
The possibility of 50 basis points: Waller's comments opened the door, but it is not the baseline
Before the data release, Fed Governor Waller publicly said that if price pressures show signs of accelerating, the December meeting should seriously consider a one-time 50 basis point hike. In its latest forecast, Deutsche Bank explicitly responded to this statement, saying Waller's remarks did open room for policy discussion of a larger move, but stressing that this is not the current baseline case. The bank positioned a 50 basis point hike as a "tail risk" rather than the main path, because consensus within the committee for a large move remains insufficient. Although some officials may lean toward a tougher stance due to the stronger-than-expected inflation data, most members prefer to manage expectations and market volatility through consecutive, predictable 25 basis point steps. This judgment echoes UBS's assessment that "support for 50 basis points is limited," with the two institutions converging on the "magnitude" question but diverging on "pace." Deutsche Bank's cautious stance shows that it acknowledges the existence of an extreme option, yet places more weight on policy continuity and communication consistency, avoiding unnecessary sharp tightening in financial conditions caused by a single large hike.
Divergence with UBS: the debate has shifted from "whether to hike" to "how quickly to follow up"
After Deutsche Bank included the January meeting in its hiking sequence, its position became clearly hawkish among major international banks. By contrast, UBS this week still maintained its baseline case of only 25 basis point hikes in December and March, while acknowledging the risk of more or faster tightening, but arguing that committee support for a one-time 50 basis point move is limited. What the two forecasts share is that disagreement over a December hike itself has largely dissipated, and the real focus has shifted to "how quickly to continue after the hike." Deutsche Bank chose a "three consecutive" path, while UBS retained room for "two hikes then a pause," representing different judgments on the pace of tightening. The essence of this divergence is a different assessment of the slope of disinflation and the speed of labor market cooling. If subsequent data continue to show broad price pressure, Deutsche Bank's consecutive path may gain more institutional followers; if November employment and inflation data show clear easing, UBS's "intermittent" framework would be more flexible. The center of gravity of the policy debate has shifted from "whether to move" to "how fast to move and how long to pause."
Market implications: December hike probability above 95%, pressure on yields, the dollar and risk assets
According to the CME FedWatch tool, traders have priced in more than a 95% probability of a 25 basis point hike at the December 8–9 meeting, and the market has almost fully digested the move. If Deutsche Bank's three-consecutive-hike path becomes a broader consensus, its impact would extend far beyond the bond market itself. Front-end U.S. Treasury yields have already approached 5% after the CPI release, and continued rate hike expectations will maintain or further increase pressure on the short end of the yield curve, while simultaneously supporting the dollar index. For risk assets, a higher and more persistent rate environment raises the valuation threshold: gold has fallen below $4,000, and tech stocks, especially high-valuation growth stocks, will face the direct impact of rising discount rates. Particularly against the backdrop of AI-related sectors coming under pressure from recent volatility in leaders such as Nvidia, a faster hiking sequence could intensify the trend of capital withdrawing from long-duration assets. If the dollar-yen exchange rate approaches the 160 mark again due to widening rate differentials, it will trigger policy attention from Tokyo. The next key observation window is November labor market data and further comments from Fed officials before the December meeting, information that will determine whether the market moves further toward the steeper path described by Deutsche Bank.
Conclusion
After the hot October CPI, Deutsche Bank added a January hike to its forecast and now expects 25 basis point hikes in December, January and March, pushing the federal funds target range to 4.50% to 4.75%. The bank does not rule out a 50 basis point hike in December, but says it is not the baseline case. On the more hawkish end among major banks, UBS still maintains a baseline of only two hikes in December and March; what both share is that the debate has shifted from "whether to hike" to "how quickly to follow up," with the divergence lying in the steepness of the path. Market pricing puts the probability of a December hike above 95%; three consecutive hikes would maintain yield pressure, support the dollar, and raise the threshold for gold and high-valuation tech stocks. The next test is November labor market data and Fed commentary before the December meeting. (Dollar index daily chart, source: E-Huitong) At 12:06 Beijing time, the dollar index stood at 103.02.
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