US consumer prices rose faster than expected in October, with headline inflation up 0.4% on the month and core prices up 0.3%, the Bureau of Labor Statistics (BLS) reported on Tuesday, 10 November. Both figures came in 0.1 percentage points above economists' forecasts and pushed Treasury yields higher as traders reassessed the chances of a bigger Federal Reserve rate rise in December.

The report, released at 8:30 a.m. Eastern Time (13:30 GMT), was the last inflation reading before the Fed's meeting on 9 December. It was also an unusual one: the BLS published no annual inflation rate, because price data for October 2025 were never collected during last year's government shutdown.

What the numbers showed

Headline CPI rose 0.4% in October, cooling from September's 0.6% increase but above the 0.3% rise economists had expected. Core CPI, which strips out food and energy, rose 0.3% for a third month in a row, above the 0.2% forecast.

Shelter costs made up more than 30% of the monthly rise, while food prices jumped 0.5%. Energy prices rose 0.7%, a sharp slowdown from September's 5.2% surge. Average hourly earnings rose 0.4% last month, the Labor Department estimated last week.

The Cleveland Federal Reserve's Nowcast model had projected a 0.24% monthly rise, so the outturn surprised even some of the more dovish forecasters. Unofficial estimates put the missing annual rate at between 3.6% and 4.0%, against September's last official reading of 3.7%.

No annual inflation rate this time

The missing year-on-year figure is a direct legacy of last autumn's 43-day federal shutdown, during which the BLS did not collect survey data for October 2025. Without that base, the bureau said it would not publish 12-month changes for October, for either the headline index or the core measure.

That leaves investors and policymakers judging the inflation picture from monthly numbers alone, with the next CPI release, covering November, due on 10 December. The gap also complicates the Fed's task: officials must decide on rates without the standard annual comparison they normally lean on.

Markets react as yields jump

Treasury yields surged after the release, with traders raising bets on tighter policy. Ahead of the data, markets had almost fully priced in a quarter-point Fed rate rise in December, with CME Group's FedWatch tool putting the odds at more than 80%.

The hotter core reading gave weight to comments overnight from Fed Governor Christopher Waller, who said the central bank should consider a larger half-point increase in December if core inflation came in at 0.3% or higher. Bitcoin fell to about $73,534 after the release, while US stock futures were mixed ahead of the open.

Wall Street had staged a powerful rebound on Monday, with the Dow Jones up 2.15%, the S&P 500 up 2.35% and the Nasdaq up 2.74%, its best day since April, helped by a sharp fall in oil prices. Tuesday's inflation numbers put that rally to an immediate test.

What it means for the Fed

The October report does not settle the December decision, but it tilts the debate towards the hawks. A third straight 0.3% monthly core reading shows underlying price pressures are proving sticky, even as the headline rate cools from September.

For households, the message is mixed: price rises slowed from September, but by less than hoped, and food costs accelerated. Petrol offered a small relief, with the average US gallon at $4.32, down a cent from $4.34 in September, according to AAA data.

Attention now turns to the producer price index, due on Friday, 13 November, and to the Fed's December meeting, where the missing annual CPI figure will hang over a decision that markets had treated as settled. Read the Wall Street Journal's live CPI coverage and the USA Today report on the October inflation data for the full figures.