The Fed's December Decision Just Got a Lot Messier

Consumer prices climbed faster than forecast in October, and the report has put a bigger December rate increase into play at the Federal Reserve.

The Bureau of Labor Statistics said Tuesday that its Consumer Price Index gained 0.4% last month. Core prices, which leave out food and energy, gained 0.3%. Economists had looked for a core increase of 0.2%. Shelter costs rose 0.3% and made up more than 30% of the overall gain. Owners' equivalent rent, the gauge of homeownership costs, also rose 0.3%, and rents climbed 0.2%. Energy prices increased 0.7%, a much smaller jump than September's 5.2%. Food rose 0.5%.

The release carried no annual inflation rate. The bureau was unable to gather full survey data for October 2025 during last year's government shutdown, so it published year-over-year figures only for some individual items.

Fed Governor Christopher Waller had set up the stakes hours earlier. Speaking in London on Tuesday morning, before the numbers came out, he said a core reading of around 0.3% would lead him to consider pushing for a half-point increase at the December meeting. The central bank usually moves in quarter-point steps.

Treasury yields jumped after the release, and stocks fell. Futures traders now treat a quarter-point increase on Dec. 9 as close to certain. They put the chance of a half-point move at roughly 14% to 15%.

The Fed raised its benchmark rate by a quarter point on Sept. 16, to a range of 3.75% to 4%, after holding steady at every meeting earlier in the year. At its Oct. 28 meeting, it kept the range unchanged. Its statement said inflation "remains elevated." Two officials, Governor Lisa Cook and Cleveland Fed President Beth Hammack, voted against that decision because they wanted another quarter-point increase.

The internal debate has turned sharply since winter. In January, Waller and Governor Stephen Miran dissented in favor of a rate cut. Miran dissented for a cut again in March and April. Waller is now weighing a half-point hike.