Editor’s note: This article was updated to add more detail and context.
U.S. consumer prices rose 0.4% in October from the prior month, exceeding the 0.3% rate economists expected but slower than September’s 0.6% pace, according to Bureau of Labor Statistics data released Tuesday.
Core CPI, which excludes food and energy, climbed 0.3% month over month against a 0.2% consensus.
The bureau did not publish annual inflation rates this month, because prices for October 2025 were never collected during last year’s government shutdown, so the monthly figures are the only inflation reading available.
Ahead of the release, the CME FedWatch tool priced a 99% chance that the Federal Reserve raises rates by a quarter point to a 4.00%–4.25% range at its Dec. 9 meeting, from the current 3.75%–4.00%.
Fed Governor Christopher Waller said Tuesday morning that a half-percentage-point rate hike should be considered in December if October core inflation came in around 0.3% or higher.
That threshold has now been met, with core prices rising 0.3% for a second straight month.
“I believe a 50 basis point hike in the policy rate should be considered at the December meeting,” Waller said in a speech at the Bank of England Watchers Conference in London.
He added that “hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take.”
Before the release, FedWatch priced only a 1.1% chance of a half-point move.
Where Prices Rose in October
Shelter costs rose 0.3% and accounted for more than 30% of the monthly increase, according to the release.
Meanwhile, energy prices rose 0.7%, with gasoline up 1%, a sharp slowdown from September’s 9.1% jump at the pump.
Food prices, however, climbed 0.5%. Prices at the grocery store rose 0.4%, and restaurant prices rose 0.5%.
Elsewhere, motor vehicle insurance rose 0.7% and medical care costs increased 0.3%. Used car prices, by contrast, fell 1.2%.
Investors Had Flagged 0.3% as the Risk-Off Number
According to a 22V Research survey, investors considered a core print of 0.2% or lower risk-on and a 0.3% print risk-off.
“+50bp being on the table after the recent tightening in FCI is very surprising to us,” 22V Research’s Dennis DeBusschere said in a note Tuesday, referring to financial conditions.
He added, however, that “Waller likely doesn’t speak for the committee, and he has been extremely high beta in his remarks.”
Market Reactions
Treasuries sold off across the curve.
The two-year yield jumped 12 basis points to 4.68% as of 9:00 a.m. ET. The 10-year yield rose 7 basis points to 4.95%, and the 30-year yield climbed 5 basis points to 5.32%.
Stock futures turned lower. S&P 500 futures fell 0.6%, Nasdaq 100 futures dropped 1.1% and Dow futures slipped 0.1%.
The State Street SPDR S&P 500 ETF (NYSE:SPY) fell 0.6% in premarket trading, and the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) dropped 0.8%.
Meanwhile, the U.S. dollar index rose 0.3% to 102.01.
Gold fell 2% to $4,056.83 an ounce, and the SPDR Gold Shares (NYSE:GLD) dropped 1.9% premarket. Silver fell 2.9% to $51.84 an ounce. Bitcoin (CRYPTO: BTC) dropped 2% to $73,762.
The Treasury sells $42 billion in 10-year notes this afternoon. Dallas Fed President Lorie Logan, Kansas City Fed President Jeffrey Schmid, Philadelphia Fed President Anna Paulson and Fed Vice Chair for Supervision Michelle Bowman are also scheduled to speak.
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