Nov. 10, 2026 — U.S. consumer prices increased more than expected in October, driven by higher food and accommodation costs, strengthening expectations that the Federal Reserve will raise interest rates next month as inflation continues to pressure households.
The Labor Department’s Consumer Price Index (CPI) report released Tuesday showed underlying inflation also remained elevated for the third consecutive month. The figures followed last week’s data showing that the labor market regained momentum in October, adding to concerns that the economy may be strong enough to sustain price pressures.
Inflation has been fueled by several factors, including higher oil prices linked to the U.S.-Israeli war with Iran, import tariffs introduced by the Trump administration, resilient consumer spending and aggressive business investment in artificial intelligence.
The rising cost of living also contributed to significant losses for President Donald Trump’s Republican Party in last week’s midterm elections.
Federal Reserve Governor Christopher Waller said Tuesday that the central bank should raise interest rates next month and warned that a larger increase might be necessary.
“The Fed seems to be falling behind the curve on inflation, and the October hold is looking like a policy mistake,” said Stephen Juneau, an economist at Bank of America Securities.
“We see a rising risk that the Fed will have to hike again in January, rather than March.”
Food and Shelter Drive Consumer Price Increases
The Consumer Price Index rose 0.4% in October after increasing 0.6% in September, according to the Labor Department’s Bureau of Labor Statistics.
It marked the third consecutive month of inflation gains of at least 0.4%. Economists surveyed had expected a 0.3% increase.
The BLS did not publish October’s year-over-year inflation rate because last year’s federal government shutdown prevented the collection of consumer price data in October 2025, leaving no direct comparison.
Some economists estimated the annual increase using the average index for September and November 2025, while others relied on interpolated figures from independent sources. Their estimates placed October’s annual CPI increase between 3.9% and 4.0%, compared with 3.7% in September.
Shelter costs, including rents and hotel and motel accommodations, accounted for more than 30% of the monthly CPI increase. These costs rose 0.3% after climbing 0.4% in September.
Food prices surged 0.5% after remaining nearly unchanged over the previous three months.
Grocery store prices increased 0.4%, driven partly by a 0.9% jump in beef prices. Egg prices rose 0.6%, while fruits and vegetables became 0.6% more expensive. Dairy products also increased 0.6%, and snack prices climbed 1.0%.
The cost of eating out continued to rise. Food prices away from home increased 0.5% after advancing 0.2% in September, while full-service restaurant meals became 0.7% more expensive.
Stephen Stanley, chief U.S. economist at Santander US Capital Markets, said rising supermarket prices could indicate that higher transportation costs are beginning to reach consumers.
“This may finally be the beginning of a pass-through of higher transportation costs to grocery prices,” Stanley said. “If this is indeed happening, it could be a feature across a broad array of goods categories.”
Energy Costs Continue to Affect Household Budgets
Energy prices remained an important source of inflationary pressure.
Gasoline prices increased 1.0% in October after surging 9.1% in September. Consumers also paid more for electricity.
Diesel prices, despite retreating from their all-time highs, continued climbing. They rose 2.7% in October following an 11.9% increase in September.
Higher diesel costs can affect a wide range of businesses because fuel is essential for transporting food, consumer goods and other products.
Oil prices have declined at least 10% so far this month, potentially offering some relief to motorists. However, economists warned that transportation-related costs could continue feeding into prices across other sectors.
Inflation-adjusted average weekly earnings also declined again in October, suggesting that rising prices continued to erode workers’ purchasing power.
Core Inflation Remains Above Expectations
Underlying inflation showed little sign of easing.
The core Consumer Price Index, which excludes volatile food and energy prices, increased 0.3% in October for the third consecutive month. Economists had expected a smaller 0.2% increase.
Economists estimated that annual core CPI inflation reached 2.8% in October, compared with 2.6% in September.
Owners’ equivalent rent, which measures how much homeowners would pay to rent their properties or earn by renting them out, increased 0.3%.
Hotel and motel room prices rose 0.6%, while airline fares advanced 0.4%. Recreation services became 0.9% more expensive, and motor vehicle insurance increased 0.7%.
Doctor visits and hospital services also recorded price increases. Health insurance prices, however, declined 1.8% after the BLS updated the data used to calculate the category.
Overall services prices excluding energy increased 0.3%, slowing from September’s 0.4% gain.
Tariffs and AI Demand Add to Goods Inflation
The October report also showed continued price increases across several goods categories, reflecting the effects of import tariffs and strong demand for technology products.
Household furnishings and supplies prices rebounded 0.7%, while toy prices increased 1.8%.
Computer and peripheral prices also rose, reflecting the influence of the artificial intelligence investment boom on technology demand.
Smartphone prices recorded a 1.4% increase, the largest monthly rise on record.
New vehicles and medication also became more expensive. Used cars and trucks moved in the opposite direction, with prices falling 1.2%.
Overall core goods prices increased 0.2% after climbing 0.3% in September.
The figures suggest that tariff-related costs are continuing to affect consumers, while strong demand for certain technology products is adding another source of price pressure.
Federal Reserve Rate Hikes Become More Likely
Financial markets are increasingly expecting the Federal Reserve to raise interest rates in December.
According to CME Group’s FedWatch tool, traders were pricing in approximately an 89% probability of a 25-basis-point increase next month, with another increase expected in March.
The central bank left its benchmark overnight interest rate unchanged within a range of 3.75% to 4.00% last month.
Economists said a substantial stock market selloff or widening credit spreads could be among the few developments capable of preventing the Fed from tightening monetary policy in December.
The stronger inflation figures have added to concerns that policymakers may need to maintain higher borrowing costs for longer to prevent price pressures from becoming entrenched.
Core PCE Inflation Could Also Remain Elevated
Although the missing October 2025 CPI data prevents a direct year-over-year comparison, it does not affect the calculation of the Personal Consumption Expenditures Price Index, which the Federal Reserve uses to assess progress toward its inflation target.
Based on October’s consumer price data, economists estimated that core PCE inflation increased 0.4%, following a 0.3% rise in September.
Over the 12 months through October, core PCE inflation was projected to increase 3.3%, compared with 3.1% in September.
These estimates could change following the release of October producer price data scheduled for Friday.
Christopher Rupkey, chief economist at FWDBONDS, said inflation remained a persistent challenge for American households.
“Inflation isn’t dead; it is very much alive and the cost-of-living crisis rages on,” Rupkey said.
Inflation Remains a Challenge for American Households
The latest figures show that inflation continues to affect everyday expenses, from groceries and restaurant meals to housing, transportation and technology products.
While declining oil prices could eventually ease some energy-related pressures, higher transportation costs, import tariffs and resilient consumer demand continue to complicate the inflation outlook.
The combination of stronger employment, persistent price increases and substantial business investment has also made it more difficult for the Federal Reserve to justify keeping interest rates unchanged.
With markets increasingly anticipating a December rate increase, policymakers face growing pressure to demonstrate that inflation is moving toward the central bank’s 2% target without unnecessarily weakening economic growth.
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