October CPI Rises 0.4%, Above Forecasts, Putting a Half-Point Fed Hike in Play

Consumer prices rose 0.4% in October on a seasonally adjusted basis, above the 0.3% consensus, and core CPI, which excludes food and energy, rose 0.3% against a 0.2% forecast, the Bureau of Labor Statistics reported Tuesday. Core has now risen 0.3% for three straight months, and on a three-month annualized basis it is running at about 3.75%. BLS published no year-over-year rates for October because it collected no October 2025 survey data during the funding lapse; the last official annual readings, for September, were 3.7% for headline and 2.6% for core.

Energy cooled but still rose: the energy index gained 0.7% after a 5.2% jump in September, and gasoline rose 1.0%. Transportation services climbed 0.8% and airline fares 0.4%, while some smaller categories posted sharp monthly gains, including intracity transportation at 6.6%, baby food and formula at 5.1% and televisions at 3.3%, according to the BLS tables. On the other side, used cars and trucks fell 1.2% and nonalcoholic beverages slipped 0.3%.

The core number lands squarely on the line Fed Governor Christopher Waller drew in a London speech a few hours before the release. He said he was leaning toward a 25 basis point hike at the December 8-9 meeting and that a 50 basis point move "should be considered" if October core came in around 0.3% or higher. After the report, CME FedWatch priced about a 12.7% to 13.6% chance of a half-point hike, up from near zero beforehand, with about 87.3% on a quarter point. The fed funds target currently sits at 3.75% to 4%.

A larger move is still the minority view. Natixis strategist Christopher Hodge said 50 basis points is "squarely on the table" given sticky inflation and Waller's comments, though core is holding steady rather than reaccelerating. What to watch: how other Fed officials respond before the blackout period, the next producer-price data, and whether futures odds for a half-point hike keep climbing into the December meeting.