WASHINGTON: US consumer prices increased more than expected in October, driven by higher costs for food and accommodation, leaving the Federal Reserve on course to raise interest rates next month.
The Consumer Price Index report from the Labor Department on Tuesday also showed a strong buildup of underlying inflation pressures for the third straight month. The Labor Department’s Bureau of Labour Statistics did not publish year-over-year inflation readings because last year’s federal government shutdown prevented the collection of consumer price data in October 2025, leaving no comparison base.
Annual consumer inflation jumped 3.7 percent in September. Inflation is running well above the US central bank’s 2 percent target. The US-Israeli war with Iran has boosted oil prices, combining with the import tariffs implemented by the Trump administration last year to lift the cost of living. High inflation contributed to the heavy losses suffered by President Donald Trump’s Republican Party in the midterm elections last week.
Fed Governor Christopher Waller said on Tuesday that the US central bank should raise rates next month, adding that “a stronger policy move may be needed.” Waller also raised the prospect of a 50 basis point hike if core consumer prices, excluding food and energy, increased 0.3 percent or more from September, which they did. “Consumers’ inflation nightmare continues with no relief in sight,” said Christopher Rupkey, chief economist at FWDBONDS.
“Fed officials are going to need to bring a bigger hose if they have any hope of putting the inflation fire out.”
The CPI increased 0.4 percent last month after advancing 0.6 percent in September. It was the third consecutive month of CPI gains of 0.4 percent or more. Economists polled by Reuters had forecast the CPI climbing 0.3 percent over the month.
Shelter, which includes rents, hotel and motel rooms, accounted for more than 30 percent of the increase in the CPI last month. Shelter costs rose 0.3 percent after climbing 0.4 percent in September.
Food prices surged 0.5 percent after barely rising in the prior three months. Grocery store prices rebounded 0.4 percent, boosted by a 0.9 percent jump in the cost of beef. Egg prices rose 0.6 percent while fruits and vegetables were 0.6 percent more expensive. Prices for dairy and related products rose 0.6 percent. The cost of snacks surged 1.0 percent.
Higher prices at the supermarket could be a reflection of more expensive diesel fuel. The cost of eating out also increased last month, with prices of food away from home surging 0.5 percent after rising 0.2 percent in September. The cost of full service meals increased 0.7 percent. Gasoline prices climbed 1.0 percent after soaring 9.1 percent. Though diesel prices have come down from record highs, they rose 2.7 percent last month after increasing 11.9 percent in September.
STRONG CORE INFLATION
Excluding the volatile food and energy components, the CPI increased 0.3 percent in October, advancing by the same margin for three months in a row. The so-called core CPI was forecast to have climbed 0.2 percent in October. Core CPI inflation increased 2.6 percent year-over-year in September. It was last month driven by a 0.3 percent rise in owners’ equivalent rent, a measure of the amount homeowners would pay to rent or would earn from renting their property.
Prices for hotel and motel rooms rose 0.6 percent. Airline fares rose 0.4 percent. The cost of recreation increased 0.8 percent, while motor vehicle insurance advanced 0.7 percent. Household furnishings and supplies prices rebounded 0.7 percent, suggesting that some pass-through from tariffs remained. There were also increases in the prices of new vehicles, medication and recreation goods.