Prices Rise 0.4% in October, Hotter Than Expected, as Fed Officials Open the Door to Bigger Hikes
Consumer prices rose 0.4% in October, a tenth of a point more than economists expected, cementing expectations for a December interest rate hike and lifting the odds of a bigger one.
The Labor Department’s Bureau of Labor Statistics released the figures Tuesday, CNBC reported. Economists surveyed by Dow Jones had looked for 0.3%. Core prices, which strip out food and energy, rose 0.3% against a 0.2% forecast.
Headline inflation cooled from a 0.6% jump in September, while core prices matched September’s 0.3% pace.
The bureau did not publish a yearly inflation rate. Last year’s government shutdown kept it from collecting enough data in October 2025, leaving no comparison month.
Annual inflation had reached 3.7% in September, Reuters reported, as the U.S.-Israeli war with Iran pushed up oil prices on top of tariffs imposed last year.
Core prices rising 0.3% a month would translate into yearly inflation above 4% if sustained, Reuters noted. The Fed’s target is 2%.
Groceries, Gas and Rent
The details showed price pressure well beyond the gas station. Gasoline rose 1% and energy 0.7% for the month, even as pump prices have fallen in recent weeks, CNBC reported.
Food costs climbed 0.5%. Beef rose 0.9% and snacks 1%, while transportation services jumped 0.8%.
Shelter rose 0.3% and accounted for more than 30% of the overall increase. Used car and truck prices were the main bright spot, falling 1.2%.
“This was the report the market could least afford to see,” Karen Manna, fixed income investment strategist at Federated Hermes, told CNBC.
Bond investors agreed. The 10-year Treasury yield, the benchmark for mortgages, car loans and credit cards, briefly traded above 5% before settling near 4.99%, CNBC reported. The 2-year yield surged more than 18 basis points to about 4.74%.
Stocks gave back part of Monday’s rally. The S&P 500 fell 0.38% to 7,521.48, the Nasdaq slid 0.74% and the Dow lost 161.95 points to 52,227.80, according to preliminary closing figures reported by CNA.
Fed Governor Christopher Waller had said in London before the release that a core reading around 0.3% would make him consider a half-point hike at the Fed’s Dec. 8-9 meeting.
“Hiking only 25 basis points would put our credibility at risk,” Waller said, according to the same CNBC report.
Dallas Fed President Lorie Logan went further at an energy conference in Houston.
“It remains clear to me, given the current outlook, that the FOMC needs to implement at least two more 25-basis-point rate increases,” she said in her prepared remarks.
“It may be possible to move more rapidly this winter than the FOMC has moved so far this fall,” Logan added.
She called the current 3.75% to 4% policy rate too low and said it was “adding to inflationary pressures,” Reuters reported.
Futures markets now see a quarter-point December hike as nearly certain. The odds of a half-point move rose to about 15% in the morning before easing to roughly 10% late in the day, according to Reuters.
Content created by Conservative Daily News and some content syndicated through CDN is available for re-publication without charge under the Creative Commons license. Visit our syndication page for details and requirements.
