U.S. consumer prices rose 0.4% in October, more than the 0.3% economists had expected, according to figures released Tuesday by the Bureau of Labor Statistics — the first inflation reading since last week's midterm elections and the last one the Federal Reserve will see before its December meeting.
The monthly increase was slower than September's 0.6% rise, but still came in hotter than Wall Street had penciled in, and core prices — which strip out volatile food and energy costs — rose 0.3% for a third straight month, also above the 0.2% forecast. The bureau said it could not provide its usual 12-month inflation figure, because it collected no pricing data in October 2025 during last year's government shutdown; economists estimated the annual headline rate at roughly 3.9% to 4.0%, up from 3.7% in September, with core inflation near 2.8%.
The hotter-than-expected print complicates the picture for a Federal Reserve that left its benchmark rate unchanged at 3.75% to 4.00% at its October meeting. Fed Governor Christopher Waller said Tuesday he is "leaning toward supporting a 0.25 percentage point increase in the policy rate" in December, and added that if inflation data continues to resemble September's, the committee "should consider a 0.5 percentage point increase" instead — citing both the inflationary pull of the AI infrastructure building boom and new Fed research suggesting energy costs are passing through to goods and services more persistently than in the past.
Markets rush to price in a December hike
The October hold is looking like a policy mistake.
Stephen Juneau, economist, Bank of America Securities
Traders responded within minutes of the release, pushing futures markets to price in roughly an 89% chance of a quarter-point rate increase in December, according to CME Group's FedWatch tool, with traders pricing in a further increase in March. Juneau said he now sees a rising risk the Fed moves again as early as January rather than waiting until spring.
Other economists pointed to the details behind the headline number. Stephen Stanley of Santander US Capital Markets said higher transportation costs appeared to be starting to pass through into grocery prices, while Christopher Rupkey of FWDBONDS said the report showed the "cost-of-living crisis rages on" for American households already strained by months of elevated prices tied to the war between the U.S., Israel and Iran, which has kept oil prices elevated since the summer.
The release also carries political weight. Cost-of-living pressures were a central theme of last week's midterms, and Tuesday's figures give both parties fresh ammunition ahead of the Fed's final policy meeting of the year in December, when officials will have to weigh a still-accelerating cost of living against a labor market that has shown signs of cooling.
