Price-hike intentions hit a four-year high! U.S. small businesses put price increases on the table, and sticky inflation is gradually becoming apparent, strengthening the prospect of Fed rate hikes.

U.S. small business owners are preparing to pass on cost pressures. The National Federation of Independent Business (NFIB) October survey released Tuesday showed a net 37% plan to raise prices in the next three months, the highest in more than four years; the small business optimism index came in at 97.8, essentially flat versus 97.9 in September and slightly above the market expectation of 97.7. The key figure is 37%, not 97.8: it describes not businessmen crushed by costs, but a group of price-setters who believe they still have pass-through ability and intend to act on it. The willingness to raise prices is back, but it is not the same kind as in 2022 The 37% is a net percentage, i.e., the share of firms planning to raise prices minus the share planning to cut them. The 2022 round stemmed from overheated demand combined with supply chain breakdowns; firms dared to raise prices because customers were lining up at the door. This round is different: it is currently driven more by rising energy costs on the supply side pushing up price-hike intentions, more owners rated their business conditions as "good" or "excellent," and actual sales are also improving. The price increases are not out of desperation, but because firms judge they can still push costs out. NFIB Chief Economist Bill Dunkelberg said: "October small business optimism changed little, as owners continue to deal with long-standing challenges, but there were some encouraging developments." The other side is that capital spending plans have softened slightlywilling to raise prices and willing to raise wages, but unwilling to expand capacity; this is defensive pricing, corresponding to "protect profit margins first." Cost drivers shift to taxes, people and wages Ranked by "single most important problem," labor quality and availability topped the list at 25%, first for the fourth consecutive month. The real change is in second place: 21% of owners cited taxes as their top problem, the highest since May 2021, up 10 percentage points month on month. A 10-point jump in a single month is unusual in the NFIB survey, but it shows that policy costs are replacing pure input costs as a new variable. Inflation itself ranked third at 17%. The wage line is still under pressure. NFIB's October employment report released on November 6 showed a net 24% of owners plan to raise wages in the next three months, the highest since December 2025; 36% of owners have unfilled job openings. Wages are the most rigid component of costs and the hardest leg of services inflation to coolit will not fall back just because gasoline gets cheaper. The three together form a closed loop: wages need to rise, tax burden expectations are climbing, input costs remain high, and demand is still holding up, so the rational choice is to raise pricesthis is precisely the micro-level source of core inflation stickiness. Against CPI and the Fed: is the oil price giving a "false cooling"? U.S. CPI rose 0.6% month on month and 3.7% year on year in September, with gasoline up 9.1% month on month and contributing more than half of the monthly increase; core CPI rose 0.3% month on month and 2.6% year on year, both above August. The market expects October headline to rise 0.3% month on month and core 0.2%. No year-on-year figure will be published this month: during the 2025 October government shutdown the Bureau of Labor Statistics did not collect price data, leaving no base period, so only month-on-month figures will be released, which will make tonight's reading look "cleaner" than usual. Oil prices are indeed making way: affected by expectations of easing in the U.S.-Iran conflict and the midterm election results, international oil prices fell more than 10% last week. But the core items did not followthe three-month annualized rate of core CPI rose from 2% in August to 3.4% in September, and September PPI rose 6.3% year on year, the largest increase in more than three years. Pressure on the input side is still in the pipeline, and NFIB's 37% is evidence that this pipeline has not yet cleared: CPI records prices that have already happened, while NFIB asks about intentions for the next three months; and small businesses are precisely the price-setters in the "last link" of restaurants, retail and construction, so their price-hike plans foreshadow the direction of core services inflation better than consumer confidence surveys. The Fed raised rates 25 basis points in September to 3.75%4.00%, the first hike since July 2023, and held steady in October; at the December 89 meeting, federal funds rate futures almost fully price in another 25 basis points. This survey cannot change the December vote, but it affects 2027if tonight's core CPI lands at 0.2% as expected, the market will easily conclude that "the hiking cycle is nearing its end"; yet the 37% price-hike plans show that even if energy suppresses the headline number, corporate pricing is still re-embedding inflation of around 3% into the economy. Natixis Chief U.S. Economist Christopher Hodge believes that with inflation stickiness above target and employment stable, there is reason for another hike in December, and a longer pause may follow next year. At present, falling oil prices and the drop in the 1-year inflation expectation in the November University of Michigan consumer survey from 4.7% to 4.3% both give the Fed reasons to slow down. But the disagreement is not over "whether to hike," but over "where to stop and for how long." For the market, small caps and regional banks are most sensitive to short-end rates, and a "higher for longer" 2027 hurts valuations more than a single December hike. For companies, the divergence in pricing power matters more than rates: chains and professional service providers with pricing power can pass on wages and taxes, while thin-margin restaurants, retailers and construction subcontractors are squeezed between minimum wages, financing costs and customers pushing for lower pricestwo kinds of business are hidden beneath the 37%.