The U.S. consumer price index (CPI) rose 0.4% in October, exceeding economists' expectations of a 0.3% increase. The Bureau of Labor Statistics reported this data on Tuesday, highlighting fresh challenges for the Federal Reserve in its efforts to curb inflation. Core CPI, which excludes volatile food and energy prices, also climbed 0.3%, surpassing the forecasted 0.2% gain.
Key drivers of the inflation included a 0.7% rise in the energy index, despite recent declines in gasoline prices. Food costs accelerated 0.5%, with notable increases in snacks (1%), beef (0.9%), and meats, poultry, fish, and eggs (0.5%). Shelter costs, which accounted for over 30% of the headline increase, rose 0.3%. Other sectors like transportation services and airline fares also saw gains.
The report triggered a mixed reaction in financial markets. Stock market futures drifted lower, while Treasury yields jumped. Traders now fully expect a quarter-percentage-point interest rate hike when the Fed meets on December 8-9, with a 13.6% chance of a half-point increase, according to the CME Group's FedWatch. Karen Manna, fixed income investment strategist at Federated Hermes, noted that the hotter inflation print raises concerns about whether the Fed has done enough to contain price pressures.
The data comes as the Federal Reserve weighs its next move on interest rates. At its October meeting, officials voted 10-2 to keep the benchmark rate between 3.75%-4%, awaiting more data. The government shutdown last year prevented the BLS from collecting sufficient data for a yearly CPI comparison, leaving some gaps in the report.