U.S. consumer prices rose more slowly in October, but monthly core CPI stayed at 0.3% for a third month, keeping the Federal Reserve's rate path central to the dollar's 2027 outlook.
Data the Bureau of Labor Statistics (BLS) released Tuesday showed all-items CPI rose 0.4% from September, compared with a 0.6% increase the month before. Core CPI, which excludes food and energy, advanced 0.3% in October, matching its monthly gains in August and September. The energy index increased 0.7%, versus 5.2% in September.
Both readings exceeded the forecasts in a Reuters economist poll: 0.3% for headline CPI and 0.2% for core CPI. The BLS did not publish most 12-month CPI comparisons for October because a 2025 funding lapse prevented it from collecting the prior-year prices needed for those calculations.
Before the release, Fed Governor Christopher Waller said a core CPI increase around 0.3% would warrant considering a 50-basis-point increase at the December meeting. That was his view, not a committee decision. On Oct. 28, the Federal Open Market Committee held its target range at 3.75% to 4%; two members voted for a quarter-point increase.
In a note written before the CPI release, MUFG senior currency analyst Lee Hardman said Brent crude had fallen toward $90 a barrel. He also said markets still expected a December hike but had pared expectations for further increases in 2027, with traders pricing one more move that year.
Chris Turner, ING's Global Head of Markets and Regional Head of Research for UK & CEE, expects inflation above 3% and further Fed tightening to support the dollar through the first quarter of 2027. His base case has the dollar weakening in the second quarter as earlier energy price increases fade from annual comparisons and short-term U.S. rates decline.
Federal Reserve staff research published Monday examined oil-price effects across five advanced economies. It found evidence that oil increases may now affect core inflation more persistently than before the pandemic, but the authors said the apparent shift may not last.
The Fed targets inflation measured by the personal consumption expenditures (PCE) price index rather than CPI. The Bureau of Economic Analysis reported that PCE inflation was 3.6% over 12 months in September. The Fed participants' median September projection put PCE inflation at 2.3% from the fourth quarter of 2026 to the fourth quarter of 2027, above the Fed's 2% goal. The next PCE report, covering October, is scheduled for Nov. 25 at 8:30 a.m. ET (13:30 UTC), before the Fed meets Dec. 8-9.
