US inflation comes in hotter than expected at 0.4% as Wall Street braces for another Fed rate hike

US inflation came in hotter than expected at 0.4% in October, giving Wall Street another reason to worry about the Federal Reserve raising interest rates again.

The latest Consumer Price Index (CPI) report showed that Americans paid more for groceries, housing, electricity, insurance, and healthcare. September was worse, with prices climbing 0.6%, but the slowdown hasn’t exactly made inflation disappear.

It makes things especially awkward for the Federal Reserve. At the October meeting, they voted 10 to 2 to keep interest rates in the 3.75% to 4% range, deciding to get some more data on the economy before deciding again. An interest rate rise is not assured, but rising prices could complicate things.

Food and housing prices keep inflation painfully high

Housing was responsible for a considerable chunk of October’s inflation. Rent, homeownership costs, and hotel stays all became more expensive, with shelter accounting for over 30% of the overall monthly increase.

The Bureau of Labor Statistics (BLS) said, “The shelter index increased 0.3 percent over the month after rising 0.4 percent in September. The index for owners’ equivalent rent rose 0.3 percent in October, and the index for rent increased 0.2 percent. The lodging away from home index rose 0.6 percent in October after rising 2.0 percent the previous month.”

Grocery shopping wasn’t much better. Food prices started climbing again after taking a break the previous month, with several everyday items becoming noticeably more expensive.

“The food index rose 0.5 percent in October after being unchanged in September. The food at home index increased 0.4 percent over the month. Four of the six major grocery store food group indexes increased in October, while one index decreased,” the BLS said.

Snacks jumped 1%, beef increased 0.9%, and the broader category covering meat, poultry, fish, and eggs rose 0.5%. Fruits, vegetables, and dairy products each became 0.6% more expensive. Other groceries climbed 0.7%.

Energy inflation was also positive, though much lower than before. The price index grew by 0.7% after increasing by 5.2% in September.

The gasoline price index rose by 1% after growing by 9.1% the previous month. The fuel oil price index increased by 2%, while the electricity index increased by 0.9%.

Natural gas service was cheaper, falling 0.8%, while energy services increased 0.6%. Before seasonal adjustments, gasoline prices actually declined 0.7%.

Core inflation refuses to cool as Wall Street watches the Fed

Meanwhile, core CPI increased 0.3% for the third consecutive month, suggesting price pressures remain widespread.

Recreation was among the biggest contributors, alongside insurance and other household expenses.

“The index for recreation increased 0.8 percent over the month after rising 0.5 percent in September. The motor vehicle insurance index rose 0.7 percent in October, and the household furnishings and operations index increased 0.2 percent,” the BLS said.

Transportation services increased 0.8%, education gained 0.3%, and new vehicles became 0.2% more expensive. Apparel, airline fares, and personal care also recorded increases.

Healthcare bills kept climbing, too. Medical care inflation reached 0.3%, compared with 0.1% in September. Hospital services rose 0.8%, physicians’ services gained 0.4%, and prescription drugs increased 0.3%. Medical care commodities advanced 0.5%.

Used cars offered one of the few meaningful price declines.

“The index for used cars and trucks declined 1.2 percent in October after rising 0.7 percent in September. The communication index decreased 0.1 percent over the month,” the BLS said.

The broader CPI-U reached 337.511, increasing 0.2% before seasonal adjustment. The CPI-W, covering urban wage earners and clerical workers, reached 331.147 after gaining 0.1%. The chained CPI rose 0.2%, with recent readings still subject to revision.

Annual comparisons remain incomplete because the 2025 government funding lapse prevented October data collection. Available figures showed gasoline prices up 37.4% from a year earlier, new vehicles gaining 0.7%, and used vehicles falling 3.3%.

For investors, the immediate concern is whether the Fed will interpret October’s figures as another warning that inflation is proving harder to control than expected.