October CPI Expected to Cool After Two Hot Months, but Fed Rate Hike Still on Table

After two months of hotter-than-expected inflation readings, economists broadly expect the October Consumer Price Index report — due Tuesday, November 10 at 8:30 a.m. Eastern — to show a meaningful slowdown. But the report will be unusual in one key respect: the Bureau of Labor Statistics will not publish year-over-year inflation rates this month, because price data from October 2025 was never collected during last year's government shutdown.

That means the month-over-month figures will carry even more weight than usual. Consensus estimates compiled by FactSet put headline CPI at roughly 0.24% for the month, a sharp drop from September's 0.60% jump. Core CPI — which strips out volatile food and energy prices and is closely watched as a signal of underlying inflation — is forecast to rise 0.2%, down from 0.3% in September, according to Morningstar.

The main reason for the expected slowdown is gasoline. UBS analysts calculated that energy prices — led by gasoline — added 0.17 percentage points to the August CPI reading and 0.39 points to September's. In October, they estimate that contribution fell to just 0.04 percentage points. Falling prices for new and used cars are also expected to pull the reading lower, according to Morningstar.

This month's CPI report will be unique. Since the BLS did not collect price data in October 2025 amid the government shutdown, it will not publish year-over-year inflation rates this month, which will put an even bigger spotlight on the month-over-month changes.— Wells Fargo economists

Wells Fargo economists estimate headline CPI rose 0.28% in October, with food inflation likely picking up as higher commodity and transportation costs filter through to grocery stores, even as gasoline inflation slowed. They forecast core CPI rose 0.21%, driven by a cooling in core goods — apparel, toys — after September's outsized increases in those categories.

Some of September's more pronounced goods price increases, including in apparel and toys, are unlikely to have been repeated in October. This should drive a cooling in core goods inflation from 0.25% in September to 0.11% in October, the latter being roughly in line with its average monthly pace this year.— Wells Fargo economists

Even so, a softer October print is unlikely to change the Federal Reserve's near-term course. Bond futures markets priced in roughly an 80% chance of a quarter-point rate increase at the Fed's December meeting, up from 67% before the October jobs report was released, according to CME FedWatch data cited by Morningstar. The federal-funds rate target currently stands at 3.75%–4.00%.

With inflation sticky above the target and the labor market stable, we think another hike will be warranted in December.— Christopher Hodge, chief US economist, Natixis

The October jobs report, released last week, showed the economy adding jobs at a robust pace. But Morningstar's chief US economist Preston Caldwell said wages — growing at 3.1% annually — remain below the threshold consistent with 2.0% inflation, meaning the labor market is not itself generating new price pressures. 'But that could change if job growth continues to run hot,' Caldwell said, according to Morningstar.

Strong jobs data leaves inflation as the most important dimension of the Fed's rate outlook going forward, and next week's CPI report is likely to be very consequential.— Jason Pride, chief of investment strategy and research, Glenmede

The Fed paused rate increases at its late-October meeting after raising rates for the first time in three years in mid-September. In its policy statement, the central bank acknowledged that 'inflation remains elevated' but said it needed 'more information' to determine the right path back to its 2% goal, according to Kiplinger. The next policy decision is due Wednesday, December 9.

UBS economist Alan Detmeister flagged one technical wrinkle that will affect readings through next spring: because the BLS could not collect data during the 2025 shutdown, there will be an upward bias in 12-month changes for housing rents between October and March, a result of how BLS procedures handle the data gap. He expects headline inflation to slow sharply in the spring of next year, barring a surge in oil prices well above the $115–$120 per barrel level seen earlier this year.

A softer core reading would be welcome after September's upside surprise, but it would do little to alter the broader picture of 2026 being a lost year for bringing core inflation back to 2%.— Wells Fargo economists

Looking further out, Morningstar's Caldwell forecasts PCE inflation — the Fed's preferred gauge — at 3.4% for 2026, 2.5% for 2027, and 2.1% for 2028, with the fading impact of tariffs, receding energy prices following the Iran war, and slowing wage and housing inflation all contributing to that gradual decline.

The CPI measures the average change in prices paid by urban consumers for a fixed basket of goods and services, based on spending data from around 24,000 families and individuals surveyed by the BLS. Headline CPI covers the full basket; core CPI excludes food and energy. The Fed's formal inflation target is measured by a separate index, the Personal Consumption Expenditures price index.

Why it matters — The October CPI report is the last major inflation reading before the Fed's December meeting, where a rate hike could raise borrowing costs for mortgages, car loans, and credit cards for millions of Americans.

Sources differ on October headline CPI month-over-month forecast: 0.28% (kiplinger.com (Wells Fargo)) vs 0.26% (kiplinger.com (UBS/Alan Detmeister)) vs 0.2% (kiplinger.com (third unnamed forecaster)) vs ~0.24% consensus (morningstar.com (FactSet)) vs 0.29% consensus (kiplinger.com (Bloomberg consensus))

Reported by kiplinger.com, morningstar.com, business-standard.com, thriveinmarkets.com