US Inflation Rose 0.4% in October, Hotter Than Forecast — and the Fed's December Hike Is Now Harder to Dodge

Tuesday morning gave the Federal Reserve the one number it did not want. American consumer prices rose 0.4% in October — a touch cooler than September’s 0.6% jump, but hotter than the 0.3% economists had pencilled in. Core prices, the measure the Fed watches closest, rose 0.3% for a third month in a row, again above the 0.2% forecast. And for the first time in living memory, the report came with no annual inflation rate at all.

The missing number is not a mistake. The Bureau of Labor Statistics said it could not publish a 12-month rate for October because it never collected October 2025 prices — data collection stopped during last year’s federal shutdown, which ran from October 1 to November 12, 2025. The last official annual reading, September’s 3.7%, now stands alone. Economists surveyed by Reuters put the unofficial October year-on-year figure at about 3.9% for headline inflation and 2.7% for core, but those are estimates, not the government’s number, and the Fed will have to decide in December without an official one.

Inside the monthly figures, shelter did most of the damage, accounting for more than 30% of the rise. Food prices jumped 0.5%. Energy slowed to 0.7% after September’s 5.2% surge, which is the main reason the headline number cooled at all. The Cleveland Fed’s Nowcast model had projected a 0.24% rise — the actual print beat it by a wide margin.

Waller drew a line. The number crossed it.

Hours before the release, Fed Governor Christopher Waller had raised the stakes in a speech in London. He said he was leaning toward a December rate rise even if October inflation came in cooler — and if core inflation came in at 0.3% or higher, a 50-basis-point hike “should be considered.” “Hiking only 25 basis points would put our credibility at risk,” he said, “a risk I am not eager to take.” Core printed at exactly 0.3%.

That changes the argument in Washington. Before Waller spoke, traders saw no chance of a half-point move; the CME FedWatch tool put an 82% chance on a quarter-point rise in December, up from 74% a week earlier. The two-year Treasury yield, which tracks rate expectations most closely, jumped about six basis points to around 4.61% after his speech. The question for December is no longer only whether the Fed moves — it is whether it moves by a quarter point or a half.

What it means for your money

The Fed held its target range at 3.75% to 4.00% on October 28, on a 10-2 vote, with Lisa Cook and Beth Hammack dissenting because they wanted another rise then. Its next meeting is December 8-9, with the decision due December 9. This CPI report is the last big inflation reading before that meeting, alongside October PCE data still to come. The November CPI does not arrive until December 10 — a day too late.

There was one softer note for households. Average hourly earnings rose 0.4% in October, according to the jobs report published November 6 — so pay kept pace with prices for the month. It does not mean paychecks outpaced inflation over the year. They did not in September, August or July, and without an official annual rate, that comparison is now harder to make.

Markets went into the print cautious rather than scared. Wall Street had just enjoyed its best day since April on Monday — the S&P 500 up 2.35% to 7,549.94, the Dow up 1,104 points to 52,389.75 — as cheaper oil and a chip rebound pulled stocks out of last week’s slide. Futures were near flat before the release. The print gives the rally something to chew on: inflation is cooling, but not fast enough for a central bank that has already raised rates once this autumn and is openly debating a bigger move next month.

Sources

• USA Today: Inflation slowed in October, but annual data missing after shutdown
• The Wall Street Journal: Monthly Inflation Slipped to 0.4% in October, but Remains Higher Than Expected
• The Wall Street Journal: CPI Report Today — October Inflation Eased on Monthly Basis, but Remains Elevated
• Reuters: US consumer prices expected to have risen at slower pace in October

Photo: AgnosticPreachersKid, Wikimedia Commons (CC BY-SA 3.0) — the Marriner S. Eccles Federal Reserve Board Building, Washington, D.C.