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Consumer prices rose more than economists expected in October on a monthly basis, offering little relief to Americans grappling with high living costs.
The Consumer Price Index, which tracks changes in prices over time, rose at a monthly pace of 0.4%, the Labor Department reported on Tuesday.
The Labor Department did not report a year-over-year inflation rate for October 2026 because the 2025 government shutdown left it without October 2025 consumer price data for comparison.
By the numbers
October’s monthly inflation increase cooled from September, when headline inflation rose 0.6% on a monthly basis.
However, the figure was hotter than expected, with economists polled by FactSet predicting October prices would rise 0.3% month-over-month.
The October inflation data is one of the first snapshots of the economy following the midterm elections, which underscored Americans’ frustration with high prices.
“Today’s CPI report suggests underlying inflation remains more persistent than the Fed would like,” Andrew Davis, head of investment strategy at Bryn Mawr Trust, said in an email. “While headline inflation moderated from September, core prices rose 0.3% for the third consecutive month, indicating that underlying price pressures have yet to meaningfully ease.”
While inflation in recent months has largely been driven by higher energy prices, October’s data shows that costs for other types of goods and products are also rising. Shelter costs, which rose 0.3% in October, accounted for more than 30% of the monthly all-items increase, the Labor Department said.
Food prices also accelerated, rising at a monthly pace of 0.5% last month after remaining flat in September, the data shows.
Energy prices
Energy costs, which have surged due to the Iran war, contributed less to the monthly rise in inflation than in past reports. Energy prices rose 0.7% in October, compared to 5.2% in September.
Gas prices have been falling for weeks as stations switch to cheaper winter blend and people pull back from summer travel.
Global oil costs, the main factor in setting prices at the pump, have also dipped amid hopes that the midterm elections could open the door to a deal between the U.S. and Iran to end the war.
On Tuesday, the national average prices for gasoline sank below $4 a gallon for the first time in nearly four months, according to AAA.
Core inflation, which excludes volatile energy and food prices, rose 0.3% in October, in line with September but slightly above economists’ forecasts.
Josh Hirt, senior U.S. economist for Vanguard, said in an email that elevated energy prices have led to a “longer-lasting shock pass-through” to core inflation, prompting the investment company to raise its year-end 2026 core inflation forecast to 3.2%.
What this means for interest rates
Wall Street analysts predicted that firmer inflation last month will spur the Federal Reserve to raise interest rates when it meets in December.
“This is the last look at CPI inflation the Fed will get before its December meeting, and it most likely seals the deal on a rate hike to close the year,” James McCann, senior economist for investment strategy at Edward Jones, said in an email. The bigger question, he added, is whether the central bank will raise its benchmark rate by a quarter or half of a percentage point.
After the latest inflation data, CME Group’s FedWatch tool showed an 85% chance the Fed would raise rates by 0.25 percentage points in December and a 15% chance of a 0.50 percentage-point hike.
The central bank stayed on the sidelines at its October meeting, although two Federal Open Market Committee members voted in favor of a rate hike.
During a conference in London on Tuesday, Christopher Waller, a member of the Fed’s Board of Governors, said policymakers should consider a 0.50 percentage-point increase when the central bank meets on Dec. 8-9.
“Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,” he said.
