The consumer price index climbed to 2.6% last month since the same time last year, the Bureau of Labor Statistics reported Wednesday. That’s a bit hotter than the 2.4% annual rate in September, which was the slowest pace since President Joe Biden’s first full month in office.
“Core” inflation, a measure that excludes volatile food and energy prices, held at 3.3% over the 12 months ending in October, the same level notched in the previous month.
The data met Wall Street expectations, and markets responded favorably Wednesday morning. Stock futures turned higher, while traders bid up the price of government bonds.
Yet there are signs that progress on bringing down inflation has stalled. All-important shelter costs rose 0.4% from September to October, accounting for over half the monthly gains, the BLS said. That category is still 4.9% pricier than the same time a year ago.
“It’s a relief that it was in line with expectations,” Kathy Jones, chief fixed income strategist at Charles Schwab Center for Financial Research, posted on X in response to the report. But “the momentum is in the wrong direction,” she wrote. “That can change quickly, but for now it suggests inflation is ‘sticky’.”
Voters vented their frustrations with living costs last week in returning President-elect Donald Trump to the White House and Republicans to control in the Senate.
Over the past four years, consumer prices have cumulatively increased about 20%, with the costs of many other goods and services rising even faster. While average wage gains continue to outstrip price hikes, leaving many households better off than before the pandemic, steeper expenses for everything from child care to home insurance have left plenty of consumers fed up and looking for change.
Wednesday’s data showed food costs inched up 0.2% in October, less than September’s 0.4% monthly gain, with eggs and dairy products still seeing price increases, the BLS said. Used vehicle costs shot up 2.7% last month, while new autos stayed flat and apparel prices fell 1.5%.
Analysts had anticipated the run-up in used car costs, as well as hotel prices — which jumped 0.4%, reversing a 1.9% decline in September — after the hurricanes that barreled through the Southeast this fall.
Broadly speaking, though, the economy remains strong as Trump prepares to reenter the Oval Office. Many employers continue to hire. Healthy retail sales and rising consumer confidence have signaled that households are willing to spend despite ongoing cost pressures.
Many voters threw their support behind Trump out of longing for the economy that prevailed during the his first term, exit polls show. Yet it isn’t clear he will be able to replicate the steady growth and low inflation from the pre-Covid era, and many economists have warned that the platform Trump ran on this year would make inflation worse if it were implemented.
Investors over the past week have been selling off government bonds because they believe Trump’s proposals, like his plans for much higher tariffs, mass deportations and deeper tax cuts, could set off another round of price growth. When investors expect overall prices to increase, they sell bonds because their fixed payments become less valuable over time. That sell-off, in turn, has caused other borrowing costs, like mortgage rates, to turn back upward despite the Federal Reserve’s ongoing interest rate cuts.
At his news conference last week announcing a quarter-point rate cut, Fed Chair Jerome Powell warned of additional “bumps” in the path back toward the central bank’s 2% inflation target. He declined to address what impact Trump’s policies could have but indicated he wouldn’t be leaving his post. Trump has said he wants an unprecedented degree of input on Fed policy that many analysts say would risk undermining the bank’s long-standing independence.
For now, inflation in other key consumer purchases remains subdued. Gas prices are about 30 cents lower than they were a year ago, while a report Tuesday from Adobe Insights showed an outright decline in online food prices over the past year, which hasn’t happened since January 2020.
Not all economists believe inflation is poised to reignite under the next administration, and some business owners don’t believe Trump would be able to implement all of his promises. Others, however, are already taking precautions after having experienced his first round of economic policies.
Estimates of the potential costs to consumers from the tariffs proposal have varied, from as high as $7,600 per U.S. household, according to the National Retail Federation, to $1,700 for middle-income households, according to the pro-business Peterson Institute for International Economics.
Analysts with Citi financial group have said the cost increases from tariffs might end up representing only a one-time price rise of as much as 2% across the economy.
But they said such an outcome is far from guaranteed.
“While policies like tariffs would likely result in some months of stronger inflation, the overall magnitude and timing of the impact on inflation from various policies is still highly uncertain,” the analysts wrote in a note this week.
