Federal Reserve officials indicated Tuesday they are leaning toward raising interest rates at their December meeting, even as new inflation data showed a slower-than-expected monthly increase in October. The developments underscore ongoing uncertainty over the central bank’s next policy steps amid shifting economic signals.
October inflation rose 0.4% month-over-month, a deceleration from September’s 0.6% increase, according to data from the Bureau of Labor Statistics. The decline was largely driven by a drop in gas prices, which fell from $4.41 per gallon on Oct. 1 to $4.18 by month’s end, a more than 5% decrease. However, core inflation—excluding food and energy—rose 0.3%, exceeding economists’ expectations of 0.2%. The Bureau of Labor Statistics noted that year-ago figures were unavailable due to a government shutdown in October 2025.
Oil prices continued their recent decline, with Brent crude briefly dipping below $90 per barrel after reaching as high as $118 on Oct. 30. Despite the easing in gasoline costs, diesel fuel prices remain 70% higher than at the start of the year, a significant input cost for transportation and goods delivery.
Federal Reserve Governor Christopher Waller said Tuesday he is "leaning toward" a rate hike in December, even if October inflation data comes in softer than expected. Waller suggested that a 50 basis point increase could be warranted if inflation readings exceed forecasts, stating that failing to follow through on expected hikes could risk the Fed’s credibility. "Hiking only 25 basis points would put our credibility at risk," he said. Waller emphasized that higher rates "will be needed, sooner rather than later," though he noted the precise timing of hikes is less critical than ensuring they are implemented.
The Federal Open Market Committee paused rate hikes in October, citing the need for "more information" to guide policy decisions. The committee’s next meeting is scheduled for December 8–9.
Across the Atlantic, Bank of England Deputy Governor Clare Lombardelli said a December rate hike in the UK is "certainly plausible," though she noted the decision depends on evolving data, including energy prices and geopolitical developments. The Bank of England raised its benchmark rate to 4% earlier this month, the first increase since August 2023, and markets are pricing in a roughly 50% chance of another move in December.
Economists had anticipated October inflation to rise 0.3% overall and 0.2% for core inflation, making the actual readings higher than expected. The mixed signals—with some price pressures easing while others persist—complicate the Fed’s path forward as it seeks to balance inflation control with economic stability.