US inflation rises 0.4% in October as gas prices ease
Consumer prices climbed a little faster than forecasters expected, but the pace of increases continued to cool as fuel costs fell during the month.
Key points
- Consumer prices grew 0.4% month on month in October, a bit more than forecasters anticipated, according to The Guardian
- AAA data shows pump prices dipped under $4 a gallon on Monday, the first such level since July
- The Fed's September rate hike was its first since 2023, and another increase is anticipated in December
- Consumer sentiment edged up late in October, while worry about a possible AI bubble grew
Prices in the United States climbed 0.4% between September and October, according to The Guardian. That was a little more than analysts had predicted, yet the pace of increases still slowed. Cheaper gas during the month held back the overall figure.
The Bureau of Labor Statistics, which compiles the data, skipped its customary annual comparison in this release. The consumer price index tracks the cost of a set of goods and services. No data was gathered in October 2025 because of a government shutdown, which is why the yearly rate is missing.
Energy costs and the Iran war
Energy costs tied to the Iran war are the biggest reason prices have climbed. Inflation has stayed above an annualised 3% since the conflict began in late February. It peaked at 4.2% in May, a three-year high, before settling between 3.4% and 3.7%.
Energy prices edged up again in October, though by less than in September. Average pump prices slid from $4.41 a gallon early in the month to $4.22. AAA data showed the average dipped under $4 on Monday, the first such level since July. Gas remains more than $1 above its level a year earlier. Diesel, used by trucks, farm machinery, buses and trains, costs nearly $2.50 more per gallon than last year, but it has also declined since October.
Federal Reserve outlook
The Fed lifted its benchmark rate in September, the first increase since 2023. Policymakers are anticipated to act again at their December gathering. Higher borrowing costs cool the economy and can bring inflation down.
The Fed aims for 2% inflation, a level it considers a steady rate of price growth. Hiring in October exceeded economists’ forecasts, which gives the central bank more scope to tighten further. Unemployment has hovered just above 4%. Because inflation is so tightly linked to energy, it is uncertain how large or fast any rate increase would be in easing prices.
Chair Kevin Warsh said on 28 October that the bank is committed to stopping shifts in individual sectors from spreading through the wider economy. He also said it aims to keep inflation expectations in check.
Politics and consumer mood
The figures arrived after midterm elections handed Democrats control of Congress. Many observers read the result as a protest against Republicans over the cost of living. Republicans, among them JD Vance, have blamed voter anger about fuel prices for their weak performance.
Consumer sentiment improved slightly toward the end of October as fuel costs came down, a University of Michigan survey found. Joanne Hsu, who directs the survey, said confidence rose among lower and middle income households but dropped 5% among those holding the largest share portfolios. Respondents also voiced rising unease about a possible AI bubble, as US equities weakened amid investor doubts over heavy AI investment.
Frequently asked questions
How much did US inflation rise in October 2026?
Prices climbed 0.4% between September and October, according to the Bureau of Labor Statistics. The rise was slightly above what economists had forecast.
Why are US prices still rising?
Higher energy costs linked to the Iran war have been the main factor. Inflation has stayed above an annualised 3% since the war began in late February.
Will the Federal Reserve raise interest rates again?
The Fed raised rates in September and is anticipated to act again at its December meeting. Higher rates can slow the economy and ease inflation.
Sources
This article was written with the help of AI from reports by the outlets listed above. See our Editorial Policy. Spotted a mistake? Tell us.
