October inflation came in hotter than expected, all but locking in a December Fed rate hike
Photo: NBC News (file photo)U.S. consumer prices rose more than expected in October, leaving the Federal Reserve on course to raise interest rates next month — and opening the door to a bigger hike than markets had counted on.
The consumer price index rose 0.4% last month after advancing 0.6% in September, the Labor Department's Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had forecast a 0.3% increase.
Excluding volatile food and energy prices, the so-called core CPI increased 0.3% in October — the third month in a row at that pace. Economists had expected core inflation to cool to 0.2%.
The report did not include year-over-year inflation figures. Last year's federal government shutdown prevented the collection of consumer price data in October 2025, leaving no comparison base. Annual consumer inflation stood at 3.7% in September, well above the Fed's 2% target.
The hot reading landed hours after Federal Reserve Governor Christopher Waller, speaking in London overnight, set a clear bar for the central bank's December 8-9 meeting. Waller said he would support at least a quarter-point rate hike even if inflation had cooled — and that if core prices rose 0.3% or more, "a stronger policy move may be needed" and a 50-basis-point hike "should be considered."
Core inflation cleared that bar. By midmorning, market bets on a half-point increase in December had jumped to close to 15%, according to Reuters, while a quarter-point move was seen as all but assured. The Fed left its benchmark overnight rate in the 3.75%-4.00% range last month, after raising it in September and pausing in October.
A Reuters poll of 101 economists conducted November 6-10 found a majority expect the Fed to hike once more in December — by 25 basis points, to a 4.00%-4.25% range — and for that to mark the end of the current tightening cycle. Around 55% of forecasters said December's move would be the last.
Gasoline prices rose again in October, climbing 1% over the month, though that was a much slower pace than September's 9.1% jump. As of Tuesday, AAA put the national average for a gallon of regular gasoline at $3.98, down from $4.37 a month ago but up from $3.07 a year earlier. The department's food-at-home index rose 0.4% over the month.
Average hourly earnings for workers on private nonfarm payrolls rose 0.4% last month, the Labor Department estimated on November 6, offering some offset to higher prices.
Markets reacted quickly to the report. Stock futures pointed to a mixed open, with Nasdaq 100 futures down about 0.8% and S&P 500 futures down 0.3%, while the yield on the 10-year U.S. Treasury hovered near 4.9%.
The October report is the last look at inflation the Fed will get before its December meeting, and most traders now expect policymakers to raise the benchmark for short-term interest rates by a quarter point on December 9 — with the debate shifting to whether they will go further.
Sources: Reuters, "US consumer prices rise above expectations in October" (Nov. 10, 2026, full text verified); Reuters, "Investors boost odds of half-point Fed hike as core CPI rise meets Waller's bar" (Nov. 10, 2026, full text verified); Reuters, "Fed to raise rates once more in December as inflation risks stay high: Reuters poll" (Nov. 10, 2026); USA Today, "Inflation slowed in October, but annual data missing after shutdown" (Nov. 10, 2026, full text verified). Event date verified: November 10, 2026 (BLS release day).
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