US Consumer Prices Rise 0.4 Percent in October, Hotter Than Forecast

Updated 14:46 UTC: US stocks fell after the report landed. In early trading the Dow Jones Industrial Average fell 281 points, or 0.5 percent, the S&P 500 dropped 0.8 percent and the Nasdaq Composite slid 1 percent, Barron's reported. Futures tied to the Nasdaq had fallen 1.4 percent and futures tied to the S&P 500 had fallen 0.8 percent just after the release, Reuters reported. Treasury yields rose, with the two year note at 4.73 percent and the 10 year note at 4.98 percent. Traders also shifted their December bets: the odds of a half point rate increase rose to 14.7 percent, according to the CME FedWatch tool reported by Barron's, while bets on another pause fell to zero.

"For the Federal Reserve, we think this cements the case for a December rate hike, particularly following Governor Waller's comments earlier this morning around the risks from persistent inflation," Daniel Siluk, global head of short duration and liquidity at Janus Henderson, wrote after the release. Skyler Weinand, chief investment officer at Regan Capital, told TheStreet the stronger than expected report sets the stage for another rate hike in December. The index moves are early trading figures, not closing figures.

US consumer prices rose 0.4 percent in October, the Bureau of Labor Statistics said on Tuesday, a slower pace than the 0.6 percent rise in September but above the 0.3 percent increase economists had forecast. Core prices, which leave out food and energy, rose 0.3 percent, the third month in a row at that pace, and also above the 0.2 percent forecast.

The Dow Jones consensus forecast reported by CNBC expected headline prices to rise 0.3 percent and core prices to rise 0.2 percent. The Federal Reserve Bank of Cleveland's Nowcast model had projected a rise of 0.24 percent. The actual figures came in above both.

No annual rate this time

The report carried no 12 month inflation rate, and no year over year changes for the main indexes. The bureau did not collect survey data in October 2025 because of a lapse in federal funding during last year's government shutdown, so there is no year ago price level to compare this October against. Bank of America had estimated annual rates near 3.8 percent for headline prices and 2.7 percent for core, but those are estimates, not official figures.

What drove the rise

Shelter costs rose 0.3 percent in October and accounted for more than 30 percent of the monthly gain in the overall index. Food prices rose 0.5 percent. Food at home rose 0.4 percent and food away from home rose 0.5 percent. Energy prices rose 0.7 percent, a sharp slowdown from September, when energy had jumped 5.2 percent and pushed the headline figure to 0.6 percent.

The mix matters for the Federal Reserve. A third straight core reading of 0.3 percent shows underlying price pressure holding steady rather than fading, and shelter, the largest single part of the index, is still rising at the same pace.

Pay kept pace on the month

Average hourly earnings for workers on private nonfarm payrolls rose 0.4 percent in October, according to a Labor Department estimate published on November 6. Pay growth therefore matched the monthly rise in prices in October itself. It did not beat inflation over the year in September, August or July.

The December decision

This is the last consumer price report before the Federal Reserve meets on December 8 and 9. The Fed held interest rates steady in October. Markets price a better than 80 percent chance of a quarter point rate increase at the December meeting, according to the CME FedWatch tool. October payrolls rose by 165,000 and unemployment edged down to 4.1 percent, so the report lands with a strong jobs market on one side and sticky monthly inflation on the other.