From CNBC · Greg Iacurci · · 3m
October inflation rises 0.4%, exceeding expectations
Consumer prices climbed faster than economists forecast, driven by housing, energy, tariffs and AI data centers, raising odds of a December rate increase.
In brief
Consumer prices climbed faster than economists forecast, driven by housing, energy, tariffs and AI data centers, raising odds of a December rate increase. US inflation rose zero point four percent in October, beating forecasts and prompting economists to predict another Federal Reserve rate increase in December…
October CPI rises faster than expected
The consumer price index rose zero point four percent on a monthly basis in October, according to the Bureau of Labor Statistics. That exceeded the zero point three percent economists expected.
Inflation slowed from September's pace
October's zero point four percent monthly rise was down from zero point six percent in September, showing some moderation but remaining uncomfortably high for policymakers.
No year-over-year comparison available
The Bureau of Labor Statistics did not report an annual inflation figure because of the federal government shutdown that ran from October one to November twelve last year, which disrupted data collection.
Fed rate increase likely in December
Mark Zandi, chief economist at Moody's, said the reading makes another rate increase in December more likely. The Federal Reserve raised rates in September and held them steady in October.
“It's uncomfortably high. The Fed's not going to be happy about it.”
Core inflation remains elevated
Core CPI, which strips out volatile food and energy prices, rose zero point three percent in October, matching September and August.
Housing drove the biggest increase
The shelter CPI index rose zero point three percent in October, accounting for over thirty percent of the total CPI increase. Housing is the largest component of the consumer price index.
Energy prices pushed inflation higher
The Iran war raised oil prices, pushing up gasoline, diesel and jet fuel costs. Gasoline rose one percent in October after a nine point one percent jump in September, while diesel remains elevated.
Diesel costs ripple through economy
Higher diesel prices add to transportation costs, affecting food and airfares. Food prices rose zero point five percent in October and airfares climbed zero point four percent as airlines raised ticket prices.
Tariffs and AI drive other categories
Tariffs imposed by the Trump administration pushed up prices for toys, furniture and appliances. AI data center buildouts have driven up electricity and consumer electronics prices by creating shortages of memory chips.
Tariff impact expected to fade
Mark Zandi said the inflationary impact of tariffs should fade by the end of the year, assuming the White House does not renew its push for more import taxes on goods.
Inflation remains above Fed target
Inflation has been above the Federal Reserve's two percent target for more than five years. Jason Pride at Glenmede said this report delivered evidence the Fed should raise rates in December.
“It would have taken exceptional evidence of disinflation to dissuade the Fed from raising rates in December, and this report delivered the opposite.”
The essence
US inflation rose zero point four percent in October, beating forecasts and prompting economists to predict another Federal Reserve rate increase in December.
