Inflation throttled back in October from its blistering pace in September amid a more moderate rise in gasoline prices, but remained high as categories like food and housing put upward pressure on consumer prices.
The consumer price index, an inflation barometer, rose 0.4% on a monthly basis in October, after adjusting for seasonal factors, the Bureau of Labor Statistics reported Tuesday. That's down from 0.6% in September but higher than the 0.3% that economists expected .
"It's uncomfortably high," said Mark Zandi, chief economist at Moody's. "The Fed's not going to be happy about it. It certainly makes it more likely we get another rate increase in December."
The Federal Reserve uses inflation data to guide its interest rate policy. The U.S. central bank raised rates in September amid a recent pickup in inflation, which economists largely attribute to the war in Iran . It held rates steady at its last meeting in October.
Economists generally assess a measure known as "core" CPI — which strips out volatile food and energy prices — to examine underlying inflation dynamics in the U.S. economy.
That core metric rose 0.3% in October, as it also did in September and August. A consistent monthly reading around 0.2% would be more in line with the Fed's 2% annual inflation target, Zandi said.
Inflation has been above the Fed's target for more than five years.
The Bureau of Labor Statistics didn't report an annual inflation figure in the latest CPI report because of the lengthy federal government shutdown that happened a year ago. That shutdown, which ran from Oct. 1 to Nov. 12, disrupted the agency's typical data collection , and it didn't release an inflation report for October 2025.
"Investors do not need year-over-year figures to see that this was a hot inflation report and that prices are not on a sustainable path back toward the Fed's 2% target," Jason Pride, chief of investment strategy and research at Glenmede, a wealth management firm, wrote in an e-mail Tuesday.
"It would have taken exceptional evidence of disinflation to dissuade the Fed from raising rates in December, and this report delivered the opposite," he wrote.
Economists pointed to four big reasons for the hotter-than-expected CPI reading.
Perhaps the largest contributor to the outsized inflation reading in Tuesday's CPI report was housing, Zandi said.
Housing is the largest component of CPI, and movements in the category strongly influence the index's month-to-month reading, he said.
The "shelter" CPI index rose 0.3% in October, accounting for over 30% of the CPI increase, according to the Bureau of Labor Statistics.
Zandi said he doesn't expect that dynamic to persist, however, because it's not consistent with the trajectory of market rents in the U.S.
"It does feel like we have a high level of monthly volatility" in the CPI data, he said. "It's all over the map month to month."
But economists said broader factors are putting upward pressure on prices, too.
"Core inflation today reflects three outsized shocks: tariffs, energy prices, and AI-related demand," Josh Hirt, senior U.S. economist at Vanguard Group, an asset manager, wrote in an e-mail Tuesday.
The Iran war has raised oil prices, pushing up prices for fuels like gasoline, diesel and jet fuel, which are refined from crude oil, economists said.
Gasoline prices rose 1% in October, a significant pullback after a 9.1% monthly increase in September, CPI data showed.
While diesel prices have retreated from recent record highs , they remain elevated and could spill more broadly into the U.S. economy in the coming months, economists said.
"Diesel prices have a really slow pass-through to all the areas of CPI, given it affects transportation costs," said Thomas Ryan, a senior North America economist at Capital Economics.
"These things take time," Ryan said. "It'll be an inflationary impetus for at least the next three to six months, I suspect."
There was some evidence of that broader percolation of diesel prices in October, such as in food prices, Zandi said. Higher diesel prices add to the cost of transporting food to the grocery store shelves, he said.
Food prices rose 0.5% in October after an unchanged reading in September, according to CPI data.
The run-up in jet fuel costs has also led airlines to raise their ticket prices, economists said. Airfares climbed 0.4% in October, after monthly increases of 1.2%, 2.7% and 3.8% in the preceding months, respectively, according to the CPI report.
Meanwhile, the inflationary impact of tariffs imposed by the Trump administration should fade by the end of the year, assuming the White House doesn't renew its push for more import taxes, Zandi said.
Certain categories of physical goods, like toys, furniture, and appliances, saw elevated inflation rates in October, likely because businesses have passed on tariff costs to consumers, he said.
The buildout of data centers that power artificial intelligence has driven up prices for electricity and consumer electronics, economists said.
Those data centers have led to a shortage of technology equipment, such as memory chips used in household electronic products like iPhones, Ryan said.
