Tuesday’s report contains no year-ago figures due to the government shutdown in October 2025, which forced the BLS to cancel that month’s inflation report.
The slightly slowing pace of inflation was largely the result of easing gas prices last month, which according to motor club AAA’s average, fell from $4.41 per gallon Oct. 1 to $4.18 by the end of the month, a more than 5% drop.
But the BLS’ report showed that the overall gas price index still rose a solid 1%, even as the average nationwide price for a gallon of unleaded fell. Home heating oil also rose 2% from September, and electricity prices rose 0.9%.
Earlier Tuesday, AAA data showed that gas prices had fallen below $4 per gallon for the first time since July. In early trading, oil prices continued their recent, sharp descent. Brent oil briefly tumbled below $90, after having been as high as $118 Oct. 30.
But diesel fuel prices are 70% higher than at the start of the year, a far larger increase than regular gas. Diesel is a major input cost for the transportation industry that delivers goods, such as groceries, to store shelves around the world.
Several other major consumer categories also put up strong rises over the month. Hospital services, vehicle insurance, dairy, and fruits and vegetables all showed large month-over-month price increases.
The price of baby food and infant formula posted its largest ever increase in October, rising 5.1%.
The price of smartphones also rose a record 1.4%, with prices likely pushed higher by the AI boom. A demand for memory for data centers has caused dozens of consumer electronics companies, such as Apple, to hike prices on their products.
The “food away from home” category, which essentially measures restaurant and takeout food prices, rose 0.5%.
Meanwhile, the “food at home” category, which follows grocery prices, rose the most since April.
Economists have repeatedly warned since the U.S. and Israel launched the Iran war in February that the unprecedented surge in diesel fuel prices could easily translate into higher food costs, given that diesel powers the trucks that transport those goods around the world.
Physicians’ services also jumped a similar amount, as did airfares. The price of new vehicles rose in October, although used car and truck prices fell by a sharp 1.2%.
Just weeks before the holiday season kicks off in earnest, the BLS reported that toy prices rose 1.8% in October.
There is a lot riding on this month’s inflation data. Economists had expected overall inflation to rise 0.3%, and core inflation to rise 0.2%.
But even before Tuesday’s report, Federal Reserve governor Christopher Waller was significantly raising the stakes for what October’s inflation would mean.
“While I am hoping for an improvement over September, even if this occurs, I would still support a 25 basis point increase” in the Fed’s Dec. 8-9 interest rate meeting, Waller said in a speech at a central banking conference in London earlier Tuesday.
“Let’s just say it. September’s inflation data were bad. There was no silver lining,” he continued. In September, inflation was on the upswing again and hit 3.7% on a year-over-year basis.
He surprised investors by going a step further, however.
“If inflation comes in substantially higher than I expect, more robust action by the FOMC may be called for,” said Waller.
Specifically, if core inflation were to rise by 0.3% or higher, “I believe a 50 basis point hike in the policy rate should be considered at the December meeting.”
The Fed has not hiked interest rates by a half percent in one sitting since 2022.
The central bank traditionally favors multiple hikes of 0.25% in succession, so members can watch how each rate increase plays out.
“Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take,” Waller concluded.
Shortly after Waller spoke, BLS announced that core inflation had indeed risen by 0.3% last month.
