US inflation rises more than expected, raising likelihood of Fed rate hike

U.S. inflation was higher than expected last month in a sign that the rising prices that powered sweeping Democratic victories in last weeks midterm elections will continue to pose challenges for the White House and the Federal Reserve.

The consumer price index rose 0.4% from September to October, the Labor Department said Tuesday, down from 0.6% the previous month. The government did not report a yearly inflation rate because last year's government shutdown meant no data was released for October 2025.

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Excluding the volatile food and energy categories, core prices rose 0.3%, the same as the preceding month. Both figures were a tenth of a point higher than forecast.

The report shows that inflation remains clearly above the Federal Reserve's target of 2%, and Americans struggles with high prices were evident as they ousted Republican majorities from the House and Senate last week. Yet with solid gains in both chambers, Democrats in Congress will soon face the challenge of how to address voters affordability concerns. President Donald Trump has acknowledged voter anger over the Iran war and gas prices but has shown no sign yet of changing course.

The persistence of elevated inflation makes it highly likely that the Fed will raise its key interest rate at its next meeting in December. The Fed increases borrowing costs in an effort to cool spending and bring down inflation.

Earlier Tuesday, Fed governor Christopher Waller, an outspoken member of the central bank's rate-setting committee, said that a hike of a half-point next month was possible, double the size of the usual quarter-point increase.

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Economic activity is strong, the labor market is stable, but inflation is too high, well above" the Fed's 2% goal, Waller said.

U.S. markets dipped immediately after the inflation report and Treasury yields ticked higher, on expectations of more persistent inflation and higher rates from the Fed.

Gas prices rose 1% from September to October, the government said, a stiff increase but still much lower than in previous months. Gas prices have soared more than 37% from a year ago. Oil prices have fallen sharply in recent days on hopes that the Iran conflict is fading, and gas costs are falling this month.

Yet there are signs higher energy prices are spreading into other parts of the economy, with air fares, public transportation, and delivery services all jumping in price. Electricity prices rose 0.9% from September to October, the most since April, and grocery prices jumped 0.4%, a painful rise after years of increases.

The AP Voter Poll, a survey of 100,000 voters, found about two-thirds blamed Trumps policies for higher costs. About 9 in 10 said the cost of living was a crucial or major factor in their vote.

Inflation has also been worsened by rampant investment in artificial intelligence infrastructure, which has contributed to higher prices for computer chips, electricity and consumer electronics. Voters swept dozens of candidates into office who had pledged to slow data center construction.

Prices are also rising in some sectors that have little to do with oil and gas or AI. Streaming video services have recently gotten more expensive, with Disney raising prices last month for its ad-supported Disney+ and Hulu streaming bundle to $12.49 a month from $11.99. The ad-free version rose by $2.50 to $21.49.

Prices also increased last month for an Apple TV/Peacock streaming bundle, to $17.99 from $14.99 a month.