Inflation in October rose 0.4% month-over-month, after energy prices eased throughout the month, bringing some relief to consumers who have been hammered by high prices for most of the year.
But while the pace of inflation slowed down, it is not reversing its upward trend. Last month, inflation jumped by 0.6%.
Core inflation, which excludes food and energy prices, rose 0.3% from September. Both readings from the Bureau of Labor Statistics were more than economists had widely expected.
Tuesday’s report contains no year-ago figures due to the government shutdown in October 2025, which forced the BLS to cancel that month’s inflation report.
The slightly slowing pace of inflation was largely the result of a decline in gas prices last month, from $4.41 per gallon on Oct. 1 to $4.18 by the end of the month, a more than 5% drop.
Earlier on Tuesday, AAA data showed that gas prices had fallen below $4 per gallon for the first time since July. In early trading, oil prices continued their recent, sharp descent. Brent oil briefly tumbled below $90, after having been as high as $118 on Oct. 30.
But diesel fuel prices are 70% higher than at the start of the year, a far larger increase than regular gas. Diesel is a major input cost for the transportation industry that delivers goods, such as groceries, to store shelves around the world.
There is a lot riding on this month’s inflation data. Economists had expected overall inflation to rise 0.3%, and core inflation to rise 0.2%.
But even before Tuesday’s report, Federal Reserve governor Christoper Waller was significantly raising the stakes for what October’s inflation would mean.
“While I am hoping for an improvement over September, even if this occurs, I would still support a 25 basis point increase” in the Fed’s December 8-9 interest rate meeting, Waller said in a speech at a central banking conference in London earlier Tuesday.
“Let’s just say it. September’s inflation data were bad. There was no silver lining,” he continued. In September, inflation was on the upswing again and hit 3.7% on a year-over-year basis.
He surprised investors by going a step further though. “However, if inflation comes in substantially higher than I expect, more robust action by the FOMC may be called for.” Waller said that if core inflation rose 0.3% or higher, “I believe a 50 basis point hike in the policy rate should be considered at the December meeting.”
The Fed has not hiked by 0.50% since 2022, and traditionally favors multiple successive 0.25% hikes in order to see how rate increases play out.
“Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,” Waller concluded.
Inflation has not hit the Fed’s 2% target since early 2021.
