Core CPI also beats expectations

Housing, food costs drive price pressure

December 'big step' rate hike comes into view

Rate futures market prices in 0.5-point increase odds

People walk past the New York Stock Exchange in New York on Tuesday (local time). [AFP]
People walk past the New York Stock Exchange in New York on Tuesday (local time). [AFP]

US consumer prices rose more than expected in October, keeping inflation concerns alive and strengthening the case for further Federal Reserve tightening. Although the pace of price increases slowed from the previous month, the stronger-than-forecast reading revived talk of a larger rate hike at the Fed's December meeting.

The Bureau of Labor Statistics said Tuesday (local time) that the consumer price index rose 0.4 percent in October from the previous month, exceeding the market consensus of 0.3 percent. The gain was nonetheless smaller than September's 0.6 percent increase.

Core CPI, which strips out volatile energy and food prices, climbed 0.3 percent month-on-month, also topping the 0.2 percent forecast. The core reading has now held at 0.3 percent for three consecutive months, matching the August and September figures.

The October report is the last consumer price reading before the Fed's final FOMC meeting of the year, scheduled for Dec. 8-9.

Year-on-year comparisons were unavailable for most categories in this release. The BLS said it was unable to collect consumer price survey data for October 2025 due to a budget gap caused by the federal government shutdown that month, making it impossible to calculate annual inflation rates for October this year.

Breaking down the components, the shelter index rose 0.3 percent from the previous month, accounting for more than 30 percent of the overall CPI increase. Food prices climbed 0.5 percent, with groceries up 0.4 percent and dining out up 0.5 percent. Energy prices rose 0.7 percent, a sharp slowdown from September's 5.2 percent gain.

Among categories excluding food and energy, recreation prices rose 0.8 percent, auto insurance climbed 0.7 percent and education costs increased 0.3 percent. Used cars and trucks, however, fell 1.2 percent.

Markets grew more alert to the possibility of additional Fed rate hikes as inflation pressure came in stronger than anticipated. The fact that core CPI beat forecasts and held steady at the same level for three straight months suggests underlying price pressures are not easing quickly.

Markets reacted immediately: US government bond yields rose and New York stock index futures fell, led by technology shares.

According to CME FedWatch, rate futures markets Wednesday priced in a 100 percent probability of a Fed rate hike in December. Of that, the odds of a 0.25 percentage point increase stood at 85.3 percent, while the probability of a 0.5 percentage point hike came in at 14.7 percent. As recently as Tuesday, the market had assigned no probability to a half-point increase.

Earlier, Fed Governor Christopher Waller had said ahead of the CPI release that a 0.5 percentage point hike at the December meeting could be considered if inflation came in stronger than expected. Other Fed officials, however, have not publicly endorsed the prospect of such a large increase.


yckim6452@heraldcorp.com