October CPI Report: Hot Inflation Lifts Odds of a December Fed Hike
The October CPI report showed US prices rising 0.4%, above forecasts, as Fed Governor Waller backed a December rate hike and Treasury yields hit 5%.
US consumer prices rose 0.4% in October, faster than forecast, according to the October CPI report the Bureau of Labor Statistics released on Tuesday, November 10. The data strengthened expectations that the Federal Reserve will raise interest rates in December.
Economists polled by Reuters had expected a 0.3% rise in the headline index, after a 0.6% gain in September. Core CPI, which excludes food and energy, rose 0.3% against forecasts of 0.2%.
It was the third straight 0.3% monthly increase in core prices. BLS data show core CPI has now risen 0.3% or more in five of the first 10 months of 2026.
October CPI report lacks annual inflation rate
The report did not include year-on-year inflation figures. The BLS did not collect October 2025 prices because of last year’s lapse in federal funding, leaving no base month for an annual comparison.
That gap puts more weight on the monthly readings. Both the headline and core numbers came in above expectations, and investors read the report as confirmation that price pressures have not cooled.
Stocks fell on the news. The Dow Jones Industrial Average closed down 0.30% at 52,231.89, the S&P 500 slipped 0.38% to 7,520.93 and the Nasdaq Composite dropped 0.74% to 25,065.87. Technology was the weakest of the 11 major S&P 500 sectors, Reuters reported.
Nvidia shares fell about 5.5%, extending a two-day slide, as investors weighed a board investigation involving chief executive Jensen Huang. The chipmaker’s drop weighed on all three major indexes. Our earlier report covers the Nvidia board probe in detail.
Waller backs a Fed rate hike in December
Federal Reserve Governor Christopher Waller added to the hawkish mood. Speaking in London on the same day, he said he was leaning towards a 25-basis-point increase at the Federal Open Market Committee’s December meeting.
Waller said a larger 50-basis-point Fed rate hike “should be considered” if October core prices rose around 0.3% or more from September. The data released that morning met that mark.
Dallas Fed President Lorie Logan also said at least two more rate increases would be needed to bring inflation down, according to CNBC and Reuters. The Fed held its benchmark rate in a 3.75% to 4% range at its October 28 meeting in a 10-2 vote.
Traders moved quickly to price in tighter policy. After the data, the CME FedWatch tool showed markets fully pricing in a rate increase in December, up from about 84% on Monday. Most of that weight sits on a quarter-point move, while the odds of a half-point hike rose to roughly 11% to 13%, from zero a day earlier.
The bond market reacted sharply. The two-year Treasury yield jumped about 18 basis points to roughly 4.74%, its biggest one-day gain since April 2025, and the 10-year yield briefly rose above 5% during the session. Treasury yields at that height raise borrowing costs for companies, homebuyers and the US government.
Why it matters for business leaders and investors
If the October CPI report leads to a December rate hike, credit will become more expensive just as companies plan budgets for 2027. Sectors that rely on cheap borrowing, such as real estate, utilities and smaller growth companies, are the most exposed. Higher yields also lower the value that investors place on future earnings, which hurts richly valued technology stocks.
The data come at a sensitive time for markets. Technology shares have already been under pressure from an AI-led sell-off, and investors are now weighing the risk of tighter monetary policy on top of it.
There is also an India angle. Rising US yields often pull global money back towards dollar assets, which can affect flows into emerging markets. Foreign portfolio investors bought a net ₹53,739 crore of Indian equities between November 2 and 9, according to depository data, partly as they moved away from crowded AI trades. A sharper Fed response could test whether that buying lasts.
The FOMC meets on December 8 and 9. Before that, policymakers will study fresh data, including October producer prices on November 13 and the PCE price index on November 25, to decide between a quarter-point and a half-point move.
Also Read: October Jobs Report: US Adds 165,000 Jobs, Unemployment at 4.1%
Markets will also watch Nvidia’s upcoming quarterly results and the trend in oil prices. Crude eased to two-month lows on Tuesday as US officials played down the prospect of imminent military action against Iran.
The full release is available on the Bureau of Labor Statistics CPI page. For background, read our report on the Fed’s decision to hold rates at 3.75%–4% and the earlier jump in US wholesale prices.
