Inflation is not cooling fast enough for the Federal Reserve, and Tuesday’s consumer price report made that harder to ignore.
What the report showed
The consumer price index rose 0.4% in October, according to the Labor Department, as reported by Reuters and CBS News. That was slower than September’s 0.6% gain but above the 0.3% economists expected. Core CPI, which strips out volatile food and energy prices, increased 0.3%, versus forecasts of 0.2%. Reuters noted it was the third consecutive month of 0.3% core readings.
There was no year-over-year figure this time. Because of the 2025 government shutdown, October 2025 prices were never collected, so the Bureau of Labor Statistics could not publish 12-month changes, according to CBS News and Stock Titan. The most recent annual readings, for September, were 3.7% for headline inflation and 2.6% for core, Stock Titan reported.
Within the details, according to Stock Titan’s review of the BLS data:
- Shelter rose 0.3%, a slight slowdown from September.
- Food prices climbed 0.5% and energy rose 0.7%.
- Car insurance, hospital services and transportation services all posted sizable gains.
- Used car and truck prices fell 1.2%.
Real average hourly earnings were unchanged for the month, meaning wage gains only kept pace with prices.
Waller’s line in the sand
The timing was notable. Hours before the release, Fed Governor Christopher Waller said in a London speech that a 0.3% or higher core reading would lead him to consider a half-point increase at the Fed’s December 8-9 meeting, according to Reuters. He also warned that a quarter-point move alone could put the Fed’s inflation-fighting credibility at risk.
October’s report landed right on his threshold. According to Reuters, markets now treat at least a quarter-point hike in December as all but certain, and odds of a half-point move rose to roughly 15% by midmorning. Yahoo Finance reported similar pricing.
Bond market reaction
Treasury yields moved higher, with Reuters reporting the largest one-day rise in the 2-year yield since early April 2025. Yahoo Finance put the 10-year yield near 4.93% in the morning, with the 30-year near 5.29%. Higher yields tend to filter through to mortgage rates, auto loans and credit card rates.
What comes next
The Fed will see more data before deciding. October producer prices arrive November 13, the next jobs report is due December 4, and November CPI is scheduled for December 10, one day after the Fed’s decision, according to Stock Titan. Some strategists argue recent market volatility is already tightening financial conditions, which could reduce the need for further hikes in 2027, Yahoo Finance reported.
