US inflation came in hotter than expected in October, with consumer prices rising 0.4% on the month and core prices up 0.3% — and the report carried an unusual gap: for the first time in memory, there is no official annual inflation rate to quote.
Key Points
- October CPI report — headline consumer prices rose 0.4% in October, above the 0.3% forecast, while core prices rose 0.3% against a 0.2% forecast.
- The Bureau of Labor Statistics published no 12-month inflation rate, because last year’s government shutdown left it with no October 2025 prices to compare against.
- Shelter rose 0.3% and accounted for more than 30% of the monthly increase, while food prices jumped 0.5% and energy rose 0.7%.
- The figures all but settle the Federal Reserve’s December decision: a rate rise at the 8–9 December meeting now looks near-certain, with a half-point move openly on the table.
The October CPI report, released by the Bureau of Labor Statistics on Tuesday 10 November, is the last inflation reading the Federal Reserve will see before it decides interest rates in December. The headline index rose 0.4% on a seasonally adjusted basis, down from 0.6% in September but a tenth of a point above the Reuters consensus. Core prices, which strip out food and energy, rose 0.3% for a third consecutive month — also a tenth above forecast.
What makes this release different is what is missing. The bureau collected no price data in October 2025, when a lapse in appropriations shut the government down, so it could not build October 2025 index levels — and without that baseline there is no 12-month change to publish for the headline index, core prices, food or shelter. The last official annual reading remains September’s, when consumer prices were up 3.7% over 12 months. Private estimates fill the gap: Bank of America puts October’s annual rate at roughly 3.8%, while KPMG’s interpolation suggests about 4.2%.
What drove the October print
Shelter was again the largest single driver, rising 0.3% and accounting for more than 30% of the monthly all-items increase, though rent of primary residence cooled to 0.2%. Food prices jumped 0.5%, the fastest increase since April, with groceries up 0.4%. Energy rose 0.7%, a sharp slowdown from September’s 5.2% surge, with petrol up 1.0%. Used cars fell 1.2%, one of the few outright declines in the report.
The momentum underneath the headline is what worries the Fed most. KPMG calculates that the three-month annualised pace of inflation jumped to 5.7% in October, up from 4.6% in September, while the core measure on the same basis rose to 3.7%. The components that feed into the Fed’s preferred gauge, the personal consumption expenditures index, point to an even hotter reading coming for October.
What it means for the December decision
The timing could hardly be more pointed. Hours before the release, Federal Reserve Governor Christopher Waller said in London that a 50 basis point rise should be considered in December if core CPI came in at around 0.3% or higher. Core landed exactly on that line. Markets reacted at once: pre-market futures fell, and bond yields climbed, with the 10-year Treasury yield rising towards 4.94%.
The Federal Reserve raised its benchmark rate to 3.75% to 4.00% in September, its first rise since 2023, and the December meeting on 8–9 December will be its last chance to move before the new year. The catch is that the Fed will have to decide almost blind: the next CPI release, covering November, is not scheduled until 10 December, the day after the meeting ends. October’s numbers are therefore the final word it will have — and they point in only one direction.
For the background to this release, see our preview of the October CPI arriving with no annual rate after the 2025 shutdown data gap, and our report on the Fed’s Waller backing a December rate hike. More in our Business section.
Sources: KPMG, “October inflation cinches December rate hike” (https://kpmg.com/us/en/articles/2026/october-2026-cpi.html); MLQ.ai, “October CPI runs hotter than expected as core inflation hits Waller’s threshold for a half-point hike” (https://mlq.ai/news/october-cpi-runs-hotter-than-expected-as-core-inflation-hits-wallers-threshold-for-a-half-point-hike/).