An official comparison with October 2025 was missing because of the government shutdown, but our calculations showed prices rose around 4 percent.
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U.S. inflation remained elevated last month, underscoring the need for the Federal Reserve to raise interest rates again this year.
Overall prices rose 0.4 percent in October after a 0.6 percent jump in September, according to the latest Consumer Price Index report from the Bureau of Labor Statistics. “Core” prices, which strip out volatile food and energy items, rose 0.3 percent.
The agency on Tuesday did not release year-over-year figures for October because it was unable to collect data during last year’s government shutdown. According to calculations by The New York Times, overall prices were around 4 percent higher compared with the same time last year, up from 3.7 percent in September. Over the same period, core prices rose about 2.8 percent.
One of the biggest drivers of inflation in October was food. Prices rose 0.5 percent last month and about 3 percent since the same time last year. That likely reflects a surge in energy prices, especially diesel prices, which have exploded costs for farmers.
Energy prices overall rose modestly in October and were up 0.7 percent for the month after a 5.2 percent jump in September. Gasoline prices rose 1 percent, significantly slower than the 9.1 percent increase during the previous period. Electricity prices rose nearly 1 percent.
October’s C.P.I. report was the last before the Fed meets for its final gathering of the year on Dec. 8-9. Policymakers have signaled that they will raise rates next month as they seek to stamp out price pressures that have pushed inflation further from their goal. While the Fed tracks C.P.I., it officially targets 2 percent inflation, as measured by the Personal Consumption Expenditures index. That level has been overshot for nearly six years.
Fed officials also watch the price of services as an indicator of the underlying pace of inflation. Specifically, they have been looking at core services excluding housing, a measure sometimes referred to as “supercore.” Those prices rose 0.4 percent in October, and have risen at an annual rate of nearly 5.5 percent over the past three months.
On Tuesday, Christopher J. Waller, a Fed governor, raised the prospects of a larger-than-usual half-point interest rate increase at the bank’s meeting in December if inflation did not show signs of moderating.
In remarks delivered at a Bank of England event, Mr. Waller said a quarter-point increase would suffice if price pressures improved. But if “core” inflation rose 0.3 percent or more, as October’s data showed, Mr. Waller warned that the Fed risked its credibility by not moving more aggressively. “Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,” he said.
Two-year Treasury yields, which are sensitive to changes in interest rate expectations, were up over 0.1 percentage points on Tuesday to 4.67 percent as investors raised wagers that the Fed would raise rates more over time to quell inflation. The labor market remains in solid shape, as October’s report released on Friday showed, affirming that the Fed can focus solely on its inflation problem.
October marked the seventh straight month in which price increases outpaced wage growth on a 12-month basis. Average hourly earnings were up 3.1 percent in October from a year earlier, well below the roughly 4 percent annual inflation pace.
The latest report on overall household debt and credit by the Federal Reserve Bank of New York shows that U.S. households remain in decent financial health. But there are still major splits between Americans who own homes and large stock portfolios and lower-income segments of the population, according to the data, which was released on Tuesday, and recent reports from private banks.
The report from the New York Fed showed that mortgage debt balances rose by $257 billion from July to September, totaling $13.4 trillion. That’s a strikingly large amount of debt, but the vast majority of Americans are managing to service it.
The stabilizing power of the 30-year, fixed-rate mortgage continues to be the strongest anchor for households’ finances. After a surge in home buying during the pandemic, tens of millions of families are still benefiting from having locked in low-rate monthly payments. That has served as a meaningful buffer for consumers, even as overall inflation has eroded their purchasing power more broadly in recent years.
Another sign of underlying resilience can be found in home equity lines of credit, which are revolving loans backed by the value of the borrowers’ home. They tend to carry much lower interest rates than credit cards, and they allow borrowers to tap their wealth without selling their home. HELOC balances rose by $23 billion in the third quarter of the year, the 18th consecutive quarterly gain, and the largest increase since 2005.
Affluent and upper middle-class households in particular have been using HELOCs in recent years for home repairs and renovations, as well as for personal expenses. Unlike 2005, when the housing bubble was near its peak, Fed researchers note that this borrowing now seems to largely be stemming from strength — not stress. Serious delinquency for these lines of credit is exceptionally low, hovering around 1 percent.
Homeowners’ equity in real estate has soared to about $36 trillion as of September from around $18 trillion in 2019. Real estate wealth is unequally distributed in the United States, with the top 10 percent of households constituting a disproportionate share of household net worth.
The surge in HELOCs made sense in view of that data, the New York Fed researchers wrote, the calling these loans “a logical point for extracting that equity.”
Still, households that are current on their debt payments are not necessarily comfortable. Other Federal Reserve research in recent years has shown that about 40 percent of the population has “little to no disposable income” at the end of month, after taxes and basic expenses are met. Credit cards borrowers with lower incomes and credit scores are now showing higher levels of distress, according to the New York Fed, while higher-income consumers have generally avoided a deterioration in credit.
And this month, a team of researchers at Bank of America noted, using anonymized account data, that financial pressure is extending beyond lower-income households.
Lower-to-middle income renters are perennially stretched, but around one in four higher-income mortgage holders are also spending more than half their income on housing, according to the bank. Financial experts generally recommend that consumers should spend no more than 30 percent of their monthly income on housing costs.
With interest rates elevated, and prices much higher for new vehicles than just a few years ago, auto loan payments have become a point of stress for lower-income borrowers as well — even if many are still finding ways to budget and meet their monthly obligations.
In a bright spot, student loan debt delinquencies have moderated. When Biden-era federal aid for those deep in student loan debt was reversed last year, there were widespread fears among some analysts that a burst in defaults could occur. For now, though, it appears most borrowers have been able to stave off missed student-loan payments.
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Kevin Hassett, the director of the White House National Economic Council, acknowledged today’s inflation report was “disappointing,” pointing to the impact of rising energy prices. (He was asked no follow-up question about the report during the brief appearance on Fox Business.)
Although investors are now leaning definitively toward a rate hike in December, there doesn’t seem to be much worry about a supersized half-point increase, as Fed Governor Waller hinted might be necessary. “An outsized move should require evidence that inflation is accelerating decisively, expectations are becoming unanchored or the economy is overheating,” said Seema Shah, chief global strategist for Principal Asset Management, in a note. “We are not there yet.”
A note about that 4 percent figure: It may be slightly exaggerated. Because of the missing October data, the Bureau of Labor Statistics had to make some assumptions when it calculated the Consumer Price Index for November 2025. The approach it took (essentially carrying over most prices from September to October) artificially depressed the November figure, which makes the increase in prices since then look larger than it really was. The effect is modest, though — there’s no question that inflation has picked up meaningfully in recent months.
SKIP ADVERTISEMENTRobert Sockin, the chief economist at PGIM, an asset management firm, tells me, “over the last few quarters inflation has shown little to no progress toward the Fed’s target and may even be worsening. Pressures remain broad-based across categories.”
He says his firm now expects the Fed to begin debating whether more aggressive policy action may be merited, saying that “signaling gradualism in an environment of hot and worsening inflation” would be a mistake.
The high costs in various corners of the healthcare system in America played a large role in voter dissatisfaction this fall. And we see some evidence of it in this inflation report. Prices for medical care commodities, which include prescription and over-the-counter drugs as well as medical equipment and supplies, were running hot this month, increasing by half a percentage point in October alone. (That comes after some more hopeful signs of cooling earlier in the year.)
The buildout of data centers has been a driving force behind America’s economic growth this year, but it’s also pushing up prices of some electronics and services that compete for the same chips. Prices for computers and related items are up 11.8 percent since this time last year, and software prices have climbed nearly 26 percent.
The cost of shelter, which drives more than a third of the overall index, has largely returned to its long-term average pace of price increases after a huge spike during the pandemic. It increased 0.3 percent over the month, down slightly from September’s pace, and is up 3.4 percent since this time a year ago according to our estimates. Hotels were the worst part of that category, rising 0.6 percent over the month; those prices have been growing at a quicker than usual clip all year.
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“All of this matters for markets, because a more patient Fed would be easier for stock bulls to navigate, while a more aggressive Fed could prove to be too big of a headwind for the market to overcome next year,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
High housing costs are keeping potential buyers on the sidelines, and the hotter-than-expected inflation data is likely to keep mortgage rates elevated, said Jeff Ostrowski, a housing market analyst at Bankrate, a consumer financial services company. “It’s hard to believe that just eight months ago, mortgage rates were flirting with 6 percent,” he said. “Now, they’re unlikely to go below 7 percent.” He added, “That means the housing market is likely to keep stumbling along, with low levels of home sales.”
Another area where higher oil prices are squeezing consumers is airfares. Prices for airline tickets were up 0.4 percent from last month and a hefty 27.8 percent year-over-year, according to our estimates. That is making holiday travel more expensive than it was last year.
SKIP ADVERTISEMENTWhen inflation first picked up last spring, the optimistic take among economists was that the increase was mostly an energy story, and that there wasn’t much sign that higher prices were filtering through the economy. That has become significantly less true in recent months. Consumer prices, excluding energy, have risen at a 3.6 percent annual rate over the past three months.
Be careful with your dishes this holiday season. The price of dishes and flatware was up 1.3 percent from last month and about 12 percent year-over-year, according to our estimates.
In his remarks in London, Waller said he expected energy prices to “remain elevated,” even as oil dips below $90 a barrel this morning. He pointed to high shipping costs and limited refining capacity. “As a consequence, elevated prices for diesel in the United States are not expected to moderate as readily as crude oil prices would in a more peaceful Middle East,” Waller said.
Though the price of food was broadly up in October, egg prices were up just 0.6 percent from last month. And they were down about 15.7 percent year-over-year, according to our estimates. Egg prices have become a political talking point.
SKIP ADVERTISEMENTSome good news for morning caffeinators: The surge in coffee prices last year appears to have moderated. The price of coffee was down -3.6 percent from last month, and up only a modest 2.3 percent from last year.
Despite the uncertainty around the year-over-year number, it’s safe to say that this was the seventh straight month in which price increases outpaced wage growth on a 12-month basis. Average hourly earnings were up 3.1 percent in October from a year earlier, while prices were up about 4 percent.
Waller’s comments just ahead of October’s report complicates things for the Fed in the sense that it introduced the idea of a big, half-point increase to rates in December if price pressures did not ease as expected. That is exactly what October’s report showed.
Another category that is heavily exposed to tariffs is toys, which were up about 8.9 percent year-over-year. Those price increases could sting going into the holiday season.
SKIP ADVERTISEMENTThis report will intensify the debate around whether the Fed has to move more aggressively in raising rates to tame inflation. Officials have so far adopted a gradual approach to lifting borrowing costs, making a move in September and then forgoing one in October. The Fed is widely expected to again raise rates in December.
Given all the noise around tariffs and energy prices, some economists at the Fed and elsewhere have been focusing on the price of services as an indicator of the underlying pace of inflation. Specifically, they have been looking at core services excluding housing, a measure sometimes referred to as “supercore.” Today’s data didn’t provide any good news on that front: Supercore prices rose 0.4 percent in October, and have risen at an annual rate of nearly 5.5 percent over the past three months.
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