On a monthly basis, overall prices rose 0.4%, according to the Consumer Price Index (CPI) data released released Tuesday.
Inflation accelerated faster than anticipated in October, driven by surging costs for housing and food, which will bolster the case for another Federal Reserve interest rate hike next month.
On a monthly basis, overall prices rose 0.4% from September, according to the Consumer Price Index (CPI) data released by the U.S. Bureau of Labor Statistics (BLS) Tuesday. That's down from the 0.6% monthly increase recorded in September but higher than the 0.2% gain forecasted by economists.
CPI measures the average costs consumers pay for a range of goods, including food, energy, commodities, and services.
Core inflation, which strips out volatile food and energy categories, rose 0.3%, also exceeding the anticipated 0.2% gain.
The BLS did not publish an official annual inflation rate because last year's government shutdown prevented the agency from collecting survey data for October 2025.
October saw the index for shelter jump 0.3%, accounting for over 30% of the monthly all-items increase. Meanwhile, the food index increased 0.5%, and the energy index rose 0.7%, coming on the heels of a 5.2% surge in September.
Prices for a wide range of goods and services, including recreation, transportation, medical care, vehicle insurance, education, airfare, and tariff-sensitive categories like furniture and apparel all increased in October.
What will the Fed do next?
"These figures hardly qualify as a shock to markets or the outlook, but the details of the report show inflation remains broad-based," says Realtor.com® senior economist Jake Krimmel.
The October CPI print, coupled with the better-than-expected jobs number released last week, signals for the Federal Reserve that it must continue focusing its efforts on combating inflation.
At last month's meeting of the Federal Open Market Committee (FOMC), policymakers voted 10-2 to keep the overnight rate at its current 3.75%-4% range.
However, a December hike now looks all but certain, with odds of a 25-basis-point increase climbing to 99% Tuesday morning, before settling back down to 85%, according to CME FedWatch.
(Realtor.com) Krimmel says that market reaction is both due to the warmer-than-anticipated CPI print and Fed Gov. Christopher Waller’s latest comments.
Speaking before the inflation report release, Waller put a 50-basis-point move on the table for December and stressed the need to follow through on market expectations for rate increases.
"When this communication is clear and credible, what really matters is that those hikes are eventually carried out," said Waller.
Additional hikes in early 2027 look more in play as well, with the 10-year Treasury going up 9 basis points just 25 minutes after the CPI release.
Lessons for buyers and sellers
For housing in the near term, Krimmel says the rising yields and growing speculation about future interest rate increases could put upward pressure on mortgage rates again, reversing a recent downward trend that saw the average rate on 30-year fixed home loans drifting to 7.18% last week.
October’s spike to 7.4% showed how quickly higher rates hurt demand, with contract signings and new listings each falling about 10% from September as buyers and sellers pulled back from the market.
And while rate swings grab the headlines and matter for the marginal buyer, the real wage squeeze is a longer-run, underexplored headwind for demand.
Real average hourly earnings were flat in October as 0.4% wage growth matched 0.4% inflation, leaving annual real wage growth negative for buyers already facing mortgage rates above 7%.