Consumer prices climbed again in October, and the latest numbers gave the Federal Reserve little reason to hold off on raising interest rates.
The U.S. Bureau of Labor Statistics reported Tuesday that the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4% on a seasonally adjusted basis in October, following a 0.6% increase in September. The index for all items less food and energy, known as core CPI, rose 0.3%, matching its gains in September and August. Before seasonal adjustment, the CPI-U rose 0.2% to an index level of 337.511.
Bloomberg reported that core CPI topped economists’ estimates for a third consecutive month.
Where Prices Moved
Shelter was the largest contributor. The BLS said the index rose 0.3% and accounted for more than 30% of the monthly increase, with owners’ equivalent rent up 0.3% and rent up 0.2%.
Food prices rose 0.5%. Grocery prices increased 0.4%, led by a 1.0% jump in snacks and a 0.9% rise in beef, while restaurant prices rose 0.5%. Bloomberg noted that grocery prices rose by the most since April.
Energy rose 0.7% after a 5.2% surge in September. Gasoline increased 1.0% on a seasonally adjusted basis after jumping 9.1% the previous month, although the BLS noted that gasoline prices fell 0.7% before seasonal adjustment. Electricity climbed 0.9%, while natural gas fell 0.8%.
Outside food and energy, recreation rose 0.8%, motor vehicle insurance rose 0.7% and medical care rose 0.3%, with hospital services up 0.8%. Used cars and trucks fell 1.2%, and communication slipped 0.1%.
A Data Gap
The BLS did not publish 12-month changes for October because it could not collect survey data in October 2025 during a lapse in appropriations. Bloomberg reported that economists estimated core inflation would have been about 2.8% on that basis, which would have been the highest since May. Bloomberg’s own calculations showed core CPI up 3.75% on a three-month annualized basis, the strongest pace in more than two years.
What it Means for the Fed
According to Bloomberg, investors expect the Fed to raise rates in December after a 25 bps increase in September and a decision to leave rates unchanged in October. Bloomberg also reported that Fed Governor Christopher Waller said a core reading of 0.3% or higher could prompt a larger, half-point move.
The report “probably locks the Fed in for a hike in December,” Thomas Simons, chief U.S. economist at Jefferies, said, according to Bloomberg. Bloomberg reported that Simons added that a further increase could come as soon as January if energy prices don’t ease.
The October report is the last CPI release before the Fed meets. The BLS will publish November data Dec. 10, a day after the meeting ends.
