October CPI Rises 0.4%, Core 0.3%, Both a Tenth Above Forecasts and At Waller's Half-Point Threshold

Hours after Fed Governor Christopher Waller told a London audience that a core reading around 0.3% would put a half-point hike on the table, the October CPI released today, Nov. 10, came in at exactly that level.

The Bureau of Labor Statistics said headline consumer prices rose a seasonally adjusted 0.4% in October. Economists surveyed by Dow Jones had forecast 0.3%. Core CPI, which strips out food and energy, rose 0.3% against a forecast of 0.2%.

September's headline reading was 0.6%, so the monthly pace slowed. Core was unchanged from September at 0.3%.

No annual rate

The BLS did not publish a 12-month inflation rate. The government shutdown last year prevented the bureau from collecting sufficient data in October 2025, so there is no comparable figure. The report did include annual figures for some individual items where data was collected.

Heather Long, an economist and Washington Post columnist, wrote on social media that the monthly pace implies inflation of about 4% over the past year. That is her estimate, not a BLS figure.

What drove the increase

Energy rose 0.7% and gasoline 1.0%, even though pump prices have fallen in recent weeks. Natural gas fell 0.8%.

Food rose 0.5%. Snacks climbed 1.0%, beef 0.9% and meats, poultry, fish and eggs 0.5%. Grocery prices rose 0.4%, and restaurant prices 0.5%.

Shelter rose 0.3% and accounted for more than 30% of the headline increase, the BLS said. Transportation services jumped 0.8%, airline fares rose 0.4% and medical care commodities rose 0.5%.

Used cars and trucks fell 1.2%. New vehicle prices rose 0.2%. Apparel, a tariff-sensitive category, rose just 0.1%.

The Fed's December math

At its October meeting, the Fed voted 10-2 to hold its benchmark rate in a range of 3.75% to 4%. Waller supported the hold, saying the Fed's communication had already led markets to price in some tightening. What matters, he said, is ensuring that the promised hikes are implemented in a reasonable period of time.

Waller said in his London speech that he is leaning toward a 25-basis-point hike in December if October inflation improves. If core CPI came in around 0.3% or higher, he said, a 50-basis-point hike should be considered at the December meeting. He added that hiking only 25 basis points in that case would put the Fed's credibility at risk, "a risk I am not eager to take."

He also said Fed staff research does not suggest that inflation pressure from the AI buildout and elevated energy prices will fade soon. He cited reports that higher shipping insurance costs and ship-to-ship oil transfers to guard against Iranian attacks are adding $20 to $30 a barrel to oil prices. More than 70% of core PCE services components posted 12-month increases above 3% in September, he said.

After the CPI release, traders fully priced in a quarter-point hike at the Dec. 8-9 meeting and put odds of a half-point move at 13.6%, according to CME Group's FedWatch. Stock market futures drifted lower and Treasury yields jumped.

Warnings from the bond market

Karen Manna, a fixed income investment strategist at Federated Hermes, said: "This was the report the market could least afford to see." She said a hotter print "raises fresh questions about whether the Fed has done enough to contain price pressures and reinforces the risk that interest rates need to move higher and stay there for longer."

Waller tied the size of the move to the data, and core landed at his 0.3% threshold. He also said he still favors the smaller move if inflation improves.

The political backdrop

The numbers land one week after Democrats won majorities in the House and Senate. The AP Voter Poll, a survey of 100,000 voters, found about two-thirds blamed President Trump's policies for higher costs. About 9 in 10 said the cost of living was a "crucial" or "major" factor in their vote.

Trump has acknowledged voter anger over the Iran war and gas prices but has shown no sign yet of changing course, the AP reported.

The next test is the Dec. 8-9 FOMC meeting. With no annual CPI rate to anchor the debate, the monthly core readings are what markets are watching.