October Inflation Report Lands Tuesday as Fed Weighs a December Hike

The October consumer price index arrives Tuesday at 8:30 a.m. ET, and the Dow Jones consensus forecast has headline prices up 0.3% for the month and core, which strips out food and energy, up 0.2%. Both would be cooler than September's 0.6% and 0.3% gains, but still mean prices keep climbing. There will be no annual reading at all: a government shutdown a year ago stopped the BLS from collecting some data and building a full index level, leaving no comparable year-over-year figure.

Drivers caught one real break. Gasoline prices fell more than 4% in October, according to the Energy Information Administration, easing a run that had tacked more than a dollar onto a gallon over the past year. That relief isn't the whole story, though. Fed officials say inflation first pushed up by President Donald Trump's tariffs and the Iran war is lasting longer than expected, with pressure surfacing in corners of the economy the shocks never touched.

Chicago Fed President Austan Goolsbee said Monday that the trouble is now about affordability and costs. He pointed to the hyperscaler build-out tied to artificial intelligence, arguing the spending on data centers, electricity, construction workers and equipment looks less like a supply shock and more like old-fashioned demand overheating. His prescription: act early. 'Be aggressive up front, to never let the economy overheat, because once it gets overheated, it's extremely painful to get rid of that kind of overheating,' he said. Goolsbee doesn't vote on the FOMC this year but will in 2027.

Bank of America filled the annual gap with an interpolated baseline, estimating headline growth at 3.8% and core at 2.7% — each 0.1 percentage point above September and well clear of the Fed's 2% target. The backdrop is otherwise strong: GDP grew 3.4% in the third quarter and is tracking 3.5% for the final three months, per the Atlanta Fed, while October nonfarm payrolls beat expectations at 165,000 and unemployment slipped to 4.1%. Inflation-adjusted wage growth has been negative.

After holding its benchmark rate in October, markets are pricing a better than 80% probability of a quarter-point hike at the December meeting, according to CME FedWatch data. BofA economist Stephen Juneau called this the last inflation report before the Fed's Dec. 8-9 gathering and said a print matching his forecast would effectively lock in another 25 basis point hike. The bigger risk to that call, he wrote, comes from financial markets rather than the data itself.