U.S. Inflation Rises 0.4% in October as Core Reading Fuels Debate Over Larger Increase
Key Facts
The U.S. consumer price index rose 0.4% month over month in October, after a 0.6% increase in September, according to the U.S. Bureau of Labor Statistics. The reading was above the 0.3% forecast in a Reuters poll, while the core index, which excludes food and energy, rose 0.3%, exceeding expectations of 0.2%. The core increase matched the index’s gains in September and August. The persistence of this rate matters to the monetary-policy debate after Federal Reserve Governor Christopher Waller said a core reading of 0.3% or more could warrant considering a larger increase in December. October data were released on November 10, ahead of next month’s scheduled Federal Open Market Committee meeting.
Components of the headline index were mixed, with housing costs continuing to contribute to the monthly increase. The shelter index rose 0.3% in October and accounted for more than 30% of the monthly increase in the headline index, according to the Bureau of Labor Statistics. The food index rose 0.5%, with food at home up 0.4% and food away from home up 0.5%. Energy rose 0.7% during the month, after a larger 5.2% increase in September. The figures show that the slowdown in headline inflation from the previous month coincided with continued price increases in key components of the consumer basket.
In energy details, gasoline prices rose 1.0% in October, compared with a 9.1% increase in September, according to the index data. The sharp slowdown in gasoline price increases helped moderate the monthly comparison for energy, with its index rising 0.7% after 5.2% the previous month. But that slowdown did not change the core inflation reading, which remained at 0.3% for a third consecutive month. Policymakers continue to focus on core inflation because it excludes food and energy, components that can change more sharply from one month to the next. The headline index includes them, so monthly increases in food and energy, along with housing, were reflected in its reading.
Waller said before the data were released that he leaned toward supporting a 25-basis-point rate increase at the December meeting, even if inflation improved in October as he expected. He added that a core inflation reading of around 0.3% or higher could warrant a stronger move, saying a 50-basis-point increase “should be considered” at the December meeting. October’s actual reading of 0.3% puts the index at the threshold Waller described, but his position reflects his view and is not an announced committee decision. He also said economic activity is strong and the labor market is stable, while inflation remains “well above” the committee’s 2% target. The Federal Reserve left its target rate range at 3.75% to 4.00% after its October meeting.
Before the report, markets were pricing in a roughly 85% chance of a rate increase at the December meeting, according to Reuters, while Reuters reported later on November 10 that the chance of a larger increase, of 50 basis points, had approached 15%. Stocks fell in early trading and Treasury yields rose, according to the Associated Press. The two-year Treasury yield also rose by its largest amount since early April 2025, Reuters reported, in a move reflecting a repricing of monetary-policy expectations. The moves came amid rising bets that inflation would remain high and the possibility of tighter policy. Before that, annual inflation had reached 3.7% in September, above the Federal Reserve’s 2% target.
No official comparison for annual inflation in October is available for most index series. The Bureau of Labor Statistics said it did not collect October 2025 survey data because of a lapse in appropriations and therefore could not publish the October 2025 indexes needed to calculate the annual comparison. Economists surveyed by Reuters estimated October headline inflation at 3.9% and core inflation at 2.7% over the 12 months ended in October, compared with 2.6% for core inflation in September. These figures are poll estimates, not an official annual reading published by the bureau for October. Against the backdrop of the report, the U.S. economy grew at an annual rate of 3.4% in the third quarter, driven mostly by consumer spending, according to the Associated Press. The absence of a published annual comparison makes October’s two monthly readings the immediate focus for assessing price trends in this release.
Attention now turns to the October producer price index, which the Bureau of Labor Statistics is scheduled to release on November 13 at 8:30 a.m. Eastern time. The November consumer price index is also scheduled to be published on December 10 at the same time. The Federal Reserve will hold its next meeting on December 8 and 9, when policymakers will decide the path of interest rates after reviewing the available data. Dallas Fed President Lorie Logan and Federal Reserve Vice Chair for Supervision Michelle Bowman are scheduled to speak later on the day October data are released. Waller’s personal view on a possible December increase remains part of the debate over the decision ahead.