US inflation came in hotter than forecast in October, giving Federal Reserve officials little room to pause as they head toward their December meeting.

The Bureau of Labor Statistics reported that the consumer price index rose 0.4% in October on a seasonally adjusted basis, down from 0.6% in September but above the 0.3% consensus. Core CPI, which excludes food and energy, climbed 0.3% for a third consecutive month, beating expectations of a 0.2% gain.

Shelter, food, and fuel drive the increase

Shelter costs were the largest contributor, accounting for more than 30% of the monthly all-items increase. Owners’ equivalent rent rose 0.3% and rent of primary residence rose 0.2%. Food prices jumped 0.5%, the biggest gain since April, with groceries up 0.4% and restaurant prices up 0.5%. Beef rose 0.9% and snacks climbed 1.0%.

Energy also added pressure. Gasoline rose 1.0% after seasonal adjustment and fuel oil jumped 2.0%. Electricity increased 0.9%, its sharpest move since April, partly reflecting surging power demand from artificial intelligence data centers. Computer prices rose 0.5%, which analysts also linked to AI demand.

Why there is no official annual inflation rate

The report is missing a standard figure: the 12-month inflation rate. The BLS did not collect October 2025 data because of a federal government shutdown that ran from October 1 to November 12, 2025. Without that base month, the agency could not publish a clean year-over-year change for most CPI series.

Economists have filled the gap with estimates. Riccardo Trezzi, who tracks inflation data, interpolated headline inflation near 4.0% and core near 2.8%. Those are unofficial figures. On a three-month annualized basis, core CPI has run at roughly 3.7%, well above the Fed’s comfort zone.

Markets price in a more aggressive Fed

The report sent a jolt through financial markets. Stock futures fell and Treasury yields spiked, with the two-year yield posting its largest one-day move since September. Traders began pricing in the possibility of a larger December hike after Fed Governor Christopher Waller had said a 50-basis-point move deserved consideration if core CPI hit 0.3%. It did.

The Fed's next meeting is scheduled for December 8-9, with a decision on December 9. Policymakers will not have the November CPI report in hand when they vote; that report arrives on December 10, one day after the decision. That makes the upcoming producer price index, jobs report, and any Fed commentary especially consequential.

Household budgets feel the squeeze

Beyond Wall Street, the data suggest household finances are under renewed pressure. Real average weekly earnings for production and nonsupervisory workers fell 0.3% in October, the Bureau of Labor Statistics said, driven by a shorter workweek. Fewer hours mean less take-home pay even when hourly wages hold steady.

The inflation report also landed one week after voters removed Republican majorities in Congress, with the cost of living cited as a major concern. For the Fed, the political backdrop adds another layer of complexity to a decision that was already looking difficult.