October inflation data sets stage for December interest rate hike

October inflation data sets stage for December interest rate hike.

Key points

• Consumer rates climbed 0.4% over the month in October, down from a 0.6% rise in September, the Labor Department stated Nov.
• The Cleveland Fed's "Nowcast" had projected a 0.21% rise in core inflation.
• In October, fruits and vegetable costs were up 0.6%, dairy product rates additionally rose 0.6%, and the cost of bakery items rose 0.2%.
• Constrained by the overall cost of living, a LendingTree survey of 2, 000 U.S.
• "In that case, I believe a 50-basis point hike in the policy rate should be considered at the December meeting, " Waller remarked while speaking in London Nov.

October inflation data sets stage for December interest rate hike. Rachel Barber USA TODAY. 2027 IRS tax brackets: New federal income limits and rates.

Notably, the IRS published new tax brackets for 2027. See the federal income limits for single taxpayers and married couples filing jointly.

Consumer rates rose at a slower pace in October than in the previous month, but forecasters suspect the slight slowdown in inflation will probable not be enough to spare Americans from higher borrowing costs as the Federal Reserve weighs another interest rate hike in December.

U.S. Consumer rates climbed 0.4% over the month in October, down from a 0.6% rise in September, the Labor Department stated Nov. 10.

Since a federal administration shutdown suspended the department's data collection in October last year, it did not report last month's annual inflation rate or year-over-year cost changes. After the report's release, the Federal Reserve Bank of Cleveland estimated consumer rates rose 3.8% over the year in October, a slight uptick from 3.7% in September.

In practice, the 0.4% rise in rates over the month is higher than forecasters anticipated. Before the report's release, the Cleveland Fed's "Nowcast" projected rates climbed by 0.24% in October. "Core" inflation additionally exceeded expectations, rising 0.3% in October, the department stated. That figure could prompt Fed authorities to vote for a larger rate hike in their final gathering this year.

"This is the last look at CPI inflation the Fed will get before its December meeting, and it most likely seals the deal on a rate hike to close the year, " James McCann, senior economist of investment strategy at Edward Jones, remarked in a note, adding the question is whether office-holders will approve a quarter- or half-point hike. "On balance we think it is most likely that the Fed will deliver a 25 basis points move, especially with oil prices moving lower in recent days and financial conditions increasingly volatile."

In the last month alone, worker pay expansion kept pace with inflation. Average hourly earnings for employees on private nonfarm payrolls were up 0.4% last month, the department estimated Nov. 6. That does not mean paychecks outpaced inflation over the year. They did not in September, August, or July. More: Robust October hiring and drop in unemployment defy expectations. What is the core US inflation rate?

"Core" inflation, the department's way to measure cost changes while excluding volatile energy and food costs, rose 0.3% in October – surpassing forecasts and matching September's pace.

Notably, the Cleveland Fed's "Nowcast" had projected a 0.21% rise in core inflation. After the report's release, it estimates core consumer cost inflation was up 2.6% over the year last month, additionally in line with September's rate.

Behind the growth were rate hikes on recreation commodities, medical care, and public transportation. As Americans booked their holiday travel, airline fares additionally ticked up last month, rising 0.4%.

And, just in time for open enrollment, the October data reveals health insurance costs fell 1.8% last month. Gas rates rise at a slower pace.

Geopolitical conflict abroad and the Iran war have been major drivers of U.S. Inflation this year as they limit the global oil supply. Regular gasoline rates are up 34%, and diesel fuel costs are up 64% since the United States attacked Iran Feb. 28, according to AAA data.

When gas rates rose 9.1%, gas rates rose again in October, climbing 1% over the month, but that marks a much slower rate of rise than in September.

As of Nov. 10, AAA reports the national average cost of a gallon of regular gasoline is $3.98, down from $4.37 last month, but up from $3.07 this time last year.

Some consumers are additionally paying more for energy at home. Electricity costs were up 0.9% last month. Nevertheless, costs for natural gas. It plenty of rely on to heat their houses and power appliances, fell 0.8% in October. Food costs rose ahead of Thanksgiving.

On average, checking out at the grocery store cost Americans more in October. The department's food at home index rose 0.4% over the month.

Beef rates, which have surged over recent years due to shrinking cattle herds, were up 0.9% in October. But Americans preparing for Thanksgiving may have their eyes on turkey's cost tag. Costs for uncooked poultry, including turkey, rose 1.9% last month.

Other holiday ingredients obtained more expensive. In October, fruits and vegetable costs were up 0.6%, dairy product rates additionally rose 0.6%, and the cost of bakery items rose 0.2%.

Constrained by the overall cost of living, a LendingTree survey of 2, 000 U.S. Adults discovered the percent of Americans planning to host Thanksgiving dinner this year is 51%, down from 59% in 2025. Among those preparing to celebrate, 53% remarked inflation is impacting their aims, with 25% changing their menu, 22% couponing more, and 14% shortening their guest list.

Those planning to skip holiday grocery store chaos will probable be met with a higher bill when dining out. The Labor Department's food away from index rose 0.5% in October. What does October inflation mean for interest rates?

Notably, the Federal Reserve is "obviously in a tricky place, " according to Oxford Economics chief U.S. Economist Michael Pearce.

"They can't do anything to reopen the Strait of Hormuz, and a few rate hikes, I think, is unlikely to derail or slow down the AI buildout much, " Pearce remarked in a Nov. 5 briefing, adding higher interest rates may prevent inflation from broadening but that "the parts of the economy that those rate hikes work on are already relatively weak and are unlikely to deliver much more in terms of disinflation."

Still, plenty of Fed watchers believe October's surprisingly robust jobs report offered office-holders room to focus on taming inflation while session their other goal of keeping unemployment low.

Most traders, according to CME FedWatch, expect policymakers to raise the benchmark for short-term interest rates by a quarter point on Dec. 9. If they do, that would bring the target range to 4% to 4.25% and create carrying a credit card balance or taking out a loan even more expensive after office-holders raised the range in September.

It's feasible office-holders could approve an even larger hike. Fed Governor Christopher Waller remarked if the October inflation report demonstrated core inflation around 0.3% or higher, "a stronger policy move may be needed."

"In that case, I believe a 50-basis point hike in the policy rate should be considered at the December meeting, " Waller remarked while speaking in London Nov. 10. "Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take." (This story was updated to add new information.).

Reach economy reporter Rachel Barber at [email protected]. Follow her on X @rachelbarber_ and on LinkedIn. SMS Facebook Twitter Email. Share your feedback to support improve our site! Share your feedback to support improve our site!

In short, october inflation data sets stage for December interest rate hike is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.