U.S. October CPI Rises 0.4% MoM... Fed Governor Waller Signals 50-Basis-Point Hike

Core CPI Rises 0.3%, Exceeding Expectations
Waller: "A 0.25-Percentage-Point Hike Risks the Fed's Credibility"
U.S. 2-Year Treasury Yield Rises

U.S. consumer prices rose more sharply than expected in October, reigniting inflation concerns. Although the rate of price growth slowed from the previous month, underlying price pressures remained strong, prompting speculation that the Federal Reserve (Fed) could raise its benchmark interest rate by as much as 0.5 percentage points in December.

The U.S. Department of Labor said on November 10 (local time) that the Consumer Price Index (CPI) rose 0.4% in October from the previous month. That exceeded the 0.3% forecast by economists surveyed by Dow Jones. However, it was down from September's 0.6% increase.

People shop for groceries at a supermarket in Manhattan, New York. New York, U.S. = Correspondent Hwang Yunju.

The core CPI, which excludes volatile food and energy prices, rose 0.3% from the previous month, exceeding the market forecast of 0.2%. Core CPI rose 0.3% for the third consecutive month since August. Analysts say that although price growth has eased somewhat, inflationary pressures are not abating easily.

By category, housing costs rose 0.3% from the previous month, accounting for more than 30% of the overall CPI increase. Food prices rose 0.5%, with food at home and dining out prices increasing 0.4% and 0.5%, respectively. Energy prices rose 0.7%, a marked slowdown from the 5.2% increase in the previous month.

Among items excluding food and energy, prices for recreation rose 0.8%, motor vehicle insurance costs increased 0.7%, and education costs rose 0.3%. In contrast, prices for used cars and trucks fell 1.2%.

This CPI report was the last consumer price reading before the Federal Open Market Committee's (FOMC) final scheduled meeting of the year, to be held on December 8-9.

Because the federal government shutdown in October 2025 prevented the collection of price survey data, year-over-year inflation rates for most categories were not provided in this release.

Fed Governor Waller Raises Possibility of a 50-Basis-Point Hike, Citing Energy and AI Investment

Before the CPI report was released that day, Fed Governor Christopher Waller said in a speech at a Bank of England (BOE)-related conference in London that he believed the Fed should raise its benchmark interest rate by at least 0.25 percentage points at the FOMC's scheduled meeting on December 8-9.

Fed Governor Christopher Waller

Waller said, "If core CPI rises by 0.3% or more in October, a stronger monetary policy response may be necessary," adding, "In that case, we should consider a 0.5-percentage-point rate hike at the December meeting."

He emphasized, "Raising the benchmark interest rate by just 0.25 percentage points could put our credibility at risk, and I do not want to take that risk."

Foreign media reported that market interest in the possibility of a 50-basis-point hike grew after the October core CPI, released following Waller's remarks, came in at 0.3%. However, Waller also said he would support a 0.25-percentage-point hike if price growth slowed as expected.

Waller cited rising energy prices and cost pressures stemming from increased investment in artificial intelligence (AI) as causes of inflation. He said it was necessary to examine whether recent increases in energy prices were being passed through to the prices of goods and services.

In particular, he noted that insurance premiums for oil tankers passing through the Strait of Hormuz and the cost of transshipping crude oil were pushing oil prices up by $20-$30 per barrel.

He also pointed to rising prices for advanced technology products needed to build AI infrastructure as another source of price pressure. Waller warned that inflationary pressures from energy prices and AI investment would be difficult to resolve in the short term, and that some effects could persist through 2027.

Markets React Immediately to Hawkish Remarks... U.S. 2-Year Treasury Yield Rises

The Personal Consumption Expenditures (PCE) price index, which the Fed closely monitors, also remains elevated. In September, the PCE price index rose 0.5% from the previous month and 3.7% year over year. Core PCE inflation was also 3.1% year over year, above the Fed's 2% inflation target.

Waller said the U.S. economy was maintaining solid growth and the labor market was stable, leaving room for further tightening. U.S. gross domestic product (GDP) grew at an annualized rate of 3.4% in the third quarter, with AI-related investment seen as driving an expansion in business investment in equipment.

Financial markets reacted immediately to the higher-than-expected inflation data and Waller's hawkish remarks favoring tighter monetary policy. The U.S. 2-year Treasury yield, which is sensitive to monetary policy, rose by more than 0.1 percentage points that day to 4.67%.

Meanwhile, household purchasing power is also under pressure as price growth outpaces wage growth. Average hourly earnings rose 3.1% year over year in October, below the approximately 4% increase in consumer prices estimated by The New York Times. Inflation has exceeded wage growth for seven consecutive months.

This content was produced with the assistance of AI translation services.