The cost of goods and services rose more than expected in October, providing another warning sign for the Fed in its efforts to rein in inflation.
The Consumer Price Index, a broad measure of costs across the U.S. economy, rose a seasonally adjusted 0.4% in the month, the Bureau of Labor Statistics said Tuesday. Economists surveyed by Dow Jones had expected a rise of 0.3%.
The so-called core CPI, which excludes volatile food and energy, rose 0.3% versus an expected 0.2% rise.
The headline CPI rose 0.6% in September, while the core rose 0.3%.
BLS does not estimate annual rates. Due to last year’s government shutdown, the bureau was unable to collect enough data in October 2025, so there are no comparable numbers available. However, the report included annual figures for some individual items for which data could be collected.
Stock market futures fell on the announcement, but U.S. Treasury yields soared. Traders have fully priced in a quarter-point rate hike at the next Fed meeting (Dec. 8-9), cutting odds in half to 13.6%, according to CME Group’s FedWatch.
“This was the last report the market wanted to see,” said Karen Manna, fixed income investment strategist at Federated Hermes. “The extent to which inflation has run hot raises new questions about whether the Fed has done enough to rein in price pressures, reinforcing the risk that interest rates will need to rise and remain there for an extended period of time.”
The report comes at a critical juncture as the Federal Reserve considers its next steps on interest rates. Central bank officials voted 10-2 at their October meeting to keep the benchmark interest rate in the 3.75%-4% range pending further data.
Gasoline prices have been falling in recent weeks, but the energy index rose 0.7% and the gasoline index rose 1%. However, the natural gas index fell by 0.8%.
Grocery costs rose 0.5%, with snacks rising 1%, beef 0.9%, and meat, poultry, fish and eggs 0.5%. Transportation services rose 0.8%. New car prices rose 0.2%, but used cars and trucks fell 1.2%.
Shelter costs rose 0.3%, and the BLS said this accounted for more than 30% of the overall increase.
Medical goods prices rose 0.5%, but the tariff-sensitive apparel sector rose only 0.1%. Airfares rose 0.4%.
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