US Consumer Prices Jump 0.4% in October, Fueling Fed Rate Hike Fears

Prices for goods and services in the United States increased more than forecast in October. The consumer price index rose a seasonally adjusted 0.4% for the month, according to the Bureau of Labor Statistics. Economists surveyed by Dow Jones had anticipated a 0.3% increase.

Core inflation, which strips out volatile food and energy costs, climbed 0.3% against expectations of a 0.2% gain. In September, overall prices had advanced 0.6%, while core prices gained 0.3%. The government did not provide an annual rate because a previous government shutdown prevented data collection in October 2025.

Energy, Food, and AI Spending Drive Increases

Price increases were broad across several categories. The energy index moved up 0.7%, with gasoline prices rising 1% despite recent declines. Natural gas fell 0.8%. Food costs grew 0.5%, driven by increases in beef, snacks, and other meats. Shelter costs gained 0.3%, making up more than 30% of the total monthly rise.

Transportation services advanced 0.8%, while airline fares rose 0.4%. Electricity prices rose 0.9%, influenced in part by massive hyperscaler spending on infrastructure for artificial intelligence. In contrast, used car and truck prices dropped 1.2%, and apparel moved up 0.1%.

Federal Reserve Weighs Larger Rate Hikes

The fresh inflation reading complicates the outlook for the Federal Reserve. Central bank policymakers kept the benchmark interest rate between 3.75% and 4% during their October meeting. However, inflation has stayed above the Fed’s 2% target for about five and a half years.

Fed Governor Christopher Waller indicated that a 0.3% core increase could justify considering a half-point rate increase. Following the report, market pricing tracked by the CME Group showed investors fully expect at least a quarter-point increase at the December meeting, with the probability of a half-point move climbing to 13.6%. Dallas Fed President Lorie Logan suggested two more quarter-point increases might be needed this winter before officials consider pausing.