TLDR
- Fed Governor Christopher Waller said a core CPI gain of 0.3% or more could justify a half-point rate hike.
- Core prices rose 0.3% in October, and overall prices rose 0.4%.
- The BLS could not publish yearly inflation figures because of last year’s shutdown.
- Food rose 0.5%, while energy cooled to 0.7% from 5.2%.
- Traders now see a 15.3% chance of a 50 basis point hike in December.
Federal Reserve Governor Christopher Waller set a clear line hours before the October inflation report. He said a core reading of 0.3% or higher could call for a larger rate hike.
The report landed on that line. Core consumer prices rose 0.3% in October, above the 0.2% economists expected.
Waller’s test meets the data
Core inflation leaves out food and energy prices. A monthly reading near 0.2% fits the Fed’s 2% target.
Waller said a half-point increase should be considered for December if core inflation reached 0.3%. “Hiking only 25 basis points would put our credibility at risk,” he said.
The Bureau of Labor Statistics said the Consumer Price Index rose 0.4% in October. Economists expected 0.3%, and September’s gain was 0.6%.
Food prices rose 0.5% after staying flat in September. Meat and dairy led the rise, while lettuce climbed 7.3% and baby food rose 5.1%.
Shelter costs increased 0.3% for the month. Rents rose 0.2%, and owners’ equivalent rent rose 0.3%.
Transportation costs rose 0.8%. Medical care climbed 0.5%, and medical services rose 0.3%.
Energy prices rose 0.7%, far below the 5.2% jump in September. Gasoline began October near $4.30 a gallon before easing late in the month, according to AAA.
Bank of America economists wrote before the report that tariffs have largely faded as a source of price pressure. They said demand tied to artificial intelligence has lifted goods prices, with tech commodities adding just under 1% to goods inflation.
The missing yearly number
The BLS did not publish a yearly inflation rate for October. It could not collect October 2025 data because of the government shutdown.
That shutdown lasted 43 days, from Oct. 1 to Nov. 12, 2025, the longest on record. A BLS spokeswoman said there will be no 12-month changes for overall or core prices.
Some economists estimate that inflation sped up slightly from a year earlier. Before the report, FactSet estimates put yearly inflation near 4%, up from 3.7% in September.
The Bureau of Economic Analysis will publish the personal consumption expenditures price index on Nov. 25. That report has full October 2025 data, so it allows a yearly comparison.
Economist Justin Wolfers wrote on X that a return to normal inflation is “a hope right now, not a reality.” Kevin Gordon of the Schwab Center for Financial Research called the report “not great” and said inflation breadth still looks poor across goods and services.
The labor market also looks firm. Employers added 165,000 jobs in October, and unemployment slipped to 4.1% from 4.2%.
Before the report, traders put 84% odds on a quarter-point hike, according to the CME FedWatch tool. That move would lift the rate range to 4.00% to 4.25%.
After the data, traders see a 15.3% chance of a larger 50 basis point move. The Fed meets Dec. 8 and 9.
