The US Bureau of Labor Statistics will release October’s Consumer Price Index at 8:30 a.m. ET on Tuesday. Economists expect headline CPI to rise 0.3% from September and core CPI, which excludes food and energy, to increase 0.2%—both slower than the previous month. A data gap caused by last year’s government shutdown means the report will not include a comparable year-over-year inflation rate, leaving investors and Federal Reserve policymakers to weigh the monthly figures alongside other measures ahead of the Fed’s December meeting.
Lower gasoline prices may only modestly ease inflation
Gasoline prices fell more than 4% in October, according to the US Energy Information Administration, offering some relief to consumers. A year earlier, rising gasoline prices had added more than $1 per gallon. Still, forecasts suggest that cheaper energy may not be enough to significantly slow overall price growth.
The consensus in a Dow Jones survey calls for headline CPI to rise 0.3% month over month and core CPI to increase 0.2%. If those estimates are borne out, both measures would cool from September’s gains of 0.6% and 0.3%, respectively, while prices would continue to rise. Core inflation is closely watched for signs of pressure in areas such as services, which are less affected by volatile food and energy costs.
Shutdown leaves October without a comparable annual rate
During last year’s government shutdown, the BLS missed some data collection and could not compile complete index levels. As a result, it will not publish a comparable year-over-year CPI reading for October this time.
Bank of America estimates that annual headline inflation was about 3.8% and core inflation about 2.7%, based on an assumption that data from the same period last year can be interpolated. Both estimates are 0.1 percentage point above September and above the Fed’s 2% inflation target. They are the bank’s calculations, not official year-over-year figures in Tuesday’s report.
Chicago Fed President Austan Goolsbee said Monday that the labor market is near levels historically associated with full employment, while inflation and the cost of living remain the main concerns. He said affordability and costs have repeatedly come up in conversations with businesses and residents across the Chicago Fed’s district.
Goolsbee points to services and AI data-center demand
Goolsbee said inflation has not eased as expected as supply shocks and tariff effects have faded. Recent price pressures have also appeared in some services that are not directly exposed to oil prices or tariffs. He added that demand tied to the construction of large AI data centers could bring price pressures closer to a traditional demand-driven overheating scenario.
Building out data centers requires construction workers, electricity and equipment, potentially adding to near-term demand for those resources. Goolsbee said the long-term productivity effects of AI should be distinguished from the current demand and price effects of investment in infrastructure. He did not say whether he favored a Fed rate hike or holding rates steady at the next meeting.
Growth and employment keep inflation in focus
US GDP grew at a 3.4% rate in the third quarter, while the Atlanta Fed’s tracking estimate for fourth-quarter growth stood at 3.5%. Employers added 165,000 jobs in October, more than expected, and the unemployment rate edged down to 4.1%. At the same time, inflation-adjusted wage growth was negative. The broadly resilient growth and jobs data have helped put price pressures at the center of the monetary-policy debate.
Bank of America expects the effect of tariffs on prices may gradually fade, but says demand from AI investment could push up goods prices. The bank is also watching persistent services inflation, as well as healthcare insurance and auto-related costs. Bank of America economist Stephen Juneau said that, if the bank’s inflation forecast is right, Tuesday’s report will be the last inflation release before the Fed’s December 8–9 meeting. It could strengthen expectations for a rate increase; unless monthly inflation comes in as low as 0.1%, Juneau said, the data alone may not be enough to rule out a hike. The bank also cited financial-market developments as an important uncertainty in its assessment.
The Fed held its benchmark rate steady at its October meeting. CME FedWatch data show markets pricing in a greater than 80% probability of a 25-basis-point rate hike in December. Goolsbee does not have a vote on the Federal Open Market Committee this year and is scheduled to gain one in 2027. He said policymakers need to remain alert to the risk of an overheating economy. Tuesday’s CPI figures will be closely watched, but the missing annual comparison means they will need to be assessed alongside other price indicators and economic data.