Inflation isn't going away. Here's what that means for interest rates.

The Federal Reserve is likely to accelerate the pace of interest rate hikes to rein in stubbornly high inflation, according to a growing number of Wall Street analysts. The latest Consumer Price Index showed that inflation rose more than expected in October, climbing 0.4%.

Analysts revise forecasts

Aditya Bhave, a U.S. economist with BofA Global Research, expects monetary policymakers to raise the Fed's benchmark rate by 0.25 percentage points at each of the central bank's next three meetings in December, January and March. Analysts at TD Securities also predict three straight quarter-point hikes, up from their previous forecast of two, because hotter inflation signals that price pressures across the U.S. are broadening.

Impact on borrowers

EY-Parthenon chief economist Gregory Daco, who is penciling in rate hikes for December and January, warned that higher borrowing costs will affect consumers nationwide. Interest rate traders put the odds of a quarter-point hike at the Fed's next meeting on Dec. 8-9 at nearly 90%, and also see a better-than-even chance of another such hike at the Jan. 26-27 gathering.

Fed signals more aggressive stance

Some Fed officials themselves have said tightening may need to be more aggressive to bring inflation in line with their 2% annual target. At a conference in London on Tuesday, Fed Governor Christopher Waller said policymakers should consider a 0.50 percentage-point increase in December, adding that a smaller hike "would put our credibility at risk." High energy prices continue to drive inflation, along with robust corporate spending on data centers and other equipment for powering AI.

Together, these forces could keep inflation elevated into 2027 and weigh further on household purchasing power, Daco said in a report.