October CPI data raises odds of December Fed rate hike

U.S. inflation rose 0.4% in October 2026, exceeding forecasts and marking the third straight month of hot readings, pressuring the Federal Reserve to consider a rate hike at its December meeting. Core inflation also beat expectations, with prices rising at a 3.7% annualized pace over three months. Food costs jumped 0.5%, led by a 5.1% surge in baby food, while shelter, energy, and transportation services all climbed, complicating the Fed's decision. Economists say the data likely seals a December rate hike, potentially raising the target range to 4%-4.25%. With housing and food consuming nearly half of household spending, higher borrowing costs could squeeze budgets further into 2027.