Markets
October CPI Rose 0.4% and Made a December Hike a Lock
US consumer prices rose 0.4% in October 2026 against 0.3% expected, and core prices rose 0.3%. Futures now fully price a December Fed hike.
The October inflation report did the one thing the bond market was hoping it would not. The Bureau of Labor Statistics said on Tuesday, November 10, that the consumer price index rose 0.4% in October on a seasonally adjusted basis, above the 0.3% in the Dow Jones consensus, after 0.6% in September. Core prices, which leave out food and energy, rose 0.3% against a forecast of 0.2%, the same pace as the month before.
There is no annual rate this time. The government shutdown of October 2025 stopped price collection that month, so the BLS has no base to compare with and did not publish 12-month changes for the main indexes. KPMG estimated by interpolation that prices were about 4.2% higher than a year earlier, up from 3.7% in September, but that is a private estimate, not an official figure, and it should be read with that caveat.
The details explain why economists were uncomfortable. Shelter rose 0.3% and accounted for more than 30% of the monthly increase. Food climbed 0.5%, with beef up 0.9% and snacks up 1%. Energy added 0.7%, as gasoline rose 1% and electricity 0.9%, and transportation services jumped 0.8%. Used cars, down 1.2%, were one of the few categories that fell. "This was the report the market could least afford to see," Karen Manna, a fixed income strategist at Federated Hermes, told CNBC.
Rate expectations moved at once. CME FedWatch showed a quarter-point hike at the December 8-9 meeting fully priced, and the odds of a half-point move rose to 13.6% from about zero before the release. The 10-year Treasury yield jumped to 4.99% from 4.88% late on Monday, and two-year yields rose about 18 basis points. Dallas Fed President Lorie Logan said she sees a need for two more quarter-point hikes, and Governor Christopher Waller had said before the data that a core reading "around 0.3" would keep a hike on the table.
Stocks gave back part of Monday's rally: the S&P 500 fell 0.4%, the Nasdaq Composite 0.7% and the Dow 0.3%. The next checks for the Fed are October's PCE price index and the November jobs report, both due before the December meeting. Until then, the debate has shifted from whether the Fed raises rates again to how far it goes, and stocks that depend on cheaper money will trade on that question.