Inflation Hotter Than Expectations, Raising Odds of 2027 Rate Hikes

Inflation picked up speed in October, as the latest Consumer Price Index (CPI) from the Bureau of Labor Statistics (BLS) accelerated faster than predictions from economists.

The October CPI saw the all-items index grow 0.4%, a slight decrease from last month’s 0.6% rise, but “hotter than expected,” according to Navy Federal Chief Economist Heather Long. Original forecasts were at 0.2% to 0.3% increases, as noted by Realtor.com® Senior Economist Jake Krimmel.

Inflation’s jump this month was due to increases in shelter inflation (up 0.3%), contributing to over 30% of the increase. Food inflation also advanced in October by 0.5%. Energy inflation, which decelerated in October, still saw a rise of 0.7%.

This month’s data does not include annual inflation numbers as the BLS noted it did not collect data in October 2025 due to the government being shut down at the time. As a result, it cannot calculate 12-month percent changes.

With the data available, Long said October’s increase “implies about a ~4% inflation rate for the past year.”

The index for all items less food and energy—core inflation—grew by 0.3% in October, the same rate of growth it saw in both September and August. Indexes that contributed to increase include household furnishings and operations, recreation, medical care, motor vehicle insurance and education.

Long said this month’s data “underscores why so many Americans voted the way they did in the mid-term elections,” speaking of the “blue wave” that overtook the elections last week.

“The same supply-side and geopolitical pressures are still at work, with energy playing an important role and tariff-driven goods inflation not going away,” added Krimmel. “These are the costs most salient to consumers and voters, as we saw, yet the Fed has less direct control over them.”

He noted that for the Fed outlook, a “December hike now looks almost certain, with odds jumping to 99% this morning.”

“Additional hikes in early 2027 look more in play as well, with the 10-year Treasury up 9 basis points just 25 minutes after the CPI report release,” Krimmel continued.

Looking at housing, Krimmel said that near-term there could be “upward pressure on mortgage rates again” due to rising Treasury yields and the potential of a rate hike from the Fed.