Here’s the inflation breakdown for October 2026 – in one chart

Inflation slowed in October from its blistering pace in September amid a more moderate rise in gasoline prices, but remained high as categories like food and housing put upward pressure on consumer prices.

The Consumer Price Index, a barometer of inflation, rose 0.4% on a monthly basis in October, after adjusting for seasonal factors, the Bureau of Labor Statistics reported Tuesday. That’s down from 0.6% in September, but higher than the 0.3% expected by economists.

“It’s an uncomfortably high level,” said Mark Zandi, chief economist at Moody’s. “The Fed is not going to be happy about this. It certainly makes another rate hike in December more likely.”

The Federal Reserve uses inflation data to guide its interest rate policy. The U.S. central bank raised rates in September amid a recent pick-up in inflation, which economists attribute largely to the war in Iran. It kept rates stable at its last meeting in October.

Economists typically evaluate a measure known as the “core” CPI – which does not take into account the volatility of food and energy prices – to examine underlying inflation dynamics in the U.S. economy.

This basic indicator increased by 0.3% in October, as was also the case in September and August. A consistent monthly figure around 0.2% would be more in line with the Fed’s 2% annual inflation target, Zandi said.

Inflation has been above the Fed’s target for more than five years.

The Bureau of Labor Statistics did not release an annual inflation figure in its latest CPI report due to the lengthy federal government shutdown that occurred a year ago. The shutdown, which ran from October 1 to November 12, disrupted the agency’s usual data collection, and it did not release an inflation report for October 2025.

“Investors don’t need year-over-year numbers to understand that this is a red-hot inflation report and that prices are not on a sustainable path toward the Fed’s 2% target,” Jason Pride, head of investment strategy and research at Glenmede, a wealth management firm, wrote Tuesday.

“It would have taken exceptional evidence of disinflation to dissuade the Fed from raising rates in December, and this report delivered the opposite,” he wrote.

Economists have pointed to four main reasons for the higher-than-expected rise in the CPI.

1. Housing

Housing may be the biggest contributor to the outsized inflation in Tuesday’s CPI report, Zandi said.

Housing is the largest component of the CPI, and movements in this category heavily influence the monthly reading of the index, he said.

The CPI “shelter” index rose 0.3% in October, accounting for more than 30% of the CPI increase, according to the Bureau of Labor Statistics.

Zandi said he does not expect this dynamic to persist, as it is not consistent with the trajectory of market rents in the United States.

“It feels like we have a high level of monthly volatility” in the CPI data, he said. “It’s all over the map month to month.”

2. Energy

But economists say broader factors are also putting upward pressure on prices.

“Core inflation today reflects three outsized shocks: tariffs, energy prices, and AI-driven demand,” Josh Hirt, senior U.S. economist at Vanguard Group, an asset manager, wrote Tuesday.

The war in Iran has driven up oil prices, leading to higher prices for fuels like gasoline, diesel and jet fuel, which are refined from crude oil, economists say.

Gasoline prices rose 1% in October, a significant decline after a 9.1% monthly increase in September, according to CPI data.

Even though diesel prices have fallen from recent records, they remain high and could have a wider impact on the US economy in the months to come, economists say.

“Diesel prices are filtering through all areas of the CPI very slowly, given that they affect transportation costs,” said Thomas Ryan, senior North America economist at Capital Economics.

“These things take time,” Ryan said. “I suspect this will lead to an inflationary impulse for at least the next three to six months.”

There was evidence of broader percolation in diesel prices in October, notably in food prices, Zandi said. Higher diesel prices increase the cost of transporting food to grocery store shelves, he said.

Food prices rose 0.5% in October after being unchanged in September, according to CPI data.

Rising jet fuel costs have also led airlines to raise their ticket prices, economists say. Airfares rose 0.4% in October, following monthly increases of 1.2%, 2.7% and 3.8% respectively in previous months, according to the CPI report.

3. Prices

At the same time, the inflationary impact of tariffs imposed by the Trump administration should fade by the end of the year, provided the White House does not renew its push for higher import taxes, Zandi said.

Some categories of physical goods, such as toys, furniture and appliances, saw high inflation rates in October, likely because businesses passed tariff costs on to consumers, he said.

4. Artificial Intelligence

The construction of data centers powering artificial intelligence has driven up the prices of electricity and consumer electronics, economists say.

These data centers have led to a shortage of technology equipment, such as memory chips used in home electronics like iPhones, Ryan said.