On November 10, the U. S. Bureau of Labor Statistics (BLS) released the Consumer Price Index (PCI) numbers for October. Both the overall PCI and the core PCI showed increases over the numbers for September.
The overall PCI showed a monthly increase of 0.4% and the core CPI went up by 0.3%. The difference between the two indices is that the core CPI excludes the typically more volatile prices, like those of food and energy.
The October numbers are troubling because they were higher than expected. Experts had predicted increases of 0.3% for the overall CPI and 0.2% for the core CPI. This indicates that the interest rate increase introduced by the Federal Reserve in September may not be working as well as expected.
The BLS did not issue a number for the inflation rate in October because it lacked the necessary data. The inflation number that everyone is familiar with is defined as the year-over-year (YoY) percentage change. It is calculated by comparing the current month CPI to the CPI for the same month the previous year.
In October, 2025 the CPI number was not published because of the federal government shutdown. Therefore, the YoY for October could not be calculated.
Even though there has not been an official inflation number released, some entities knowledgeable in this area have done some interpolating of the data available and have come up with a likely inflation rate for October of about 4.0%.
Federal Reserve System (Fed) Chairman Kevin Warsh, who took office on May 22 this year, has repeatedly expressed his commitment to bring down inflation to the desired 2.0% level. Thus far, efforts to do so have fallen short. This has led to renewed calls for the Fed to do more.
Prior to the release of the October CPI numbers, most economic observers were predicting that the Fed would increase interest rates by 25 basis points at the next meeting of the Fed’s Federal Open Market Committee on December 8-9. Now that we have the October numbers, the consensus has shifted sharply toward a 50 basis points increase instead.
One concern is that the type of inflation we are experiencing does not respond well to interest rate increases. A significant cause of the current inflation is a byproduct of the war in Iran, namely higher energy costs. It is difficult to predict what may happen in Iran.
The Strait of Hormuz continues to be effectively closed. According to https://straits.live/, a website that monitors Strait of Hormuz traffic, as of November 8, commercial traffic was at 4% of typical.
Until this important sea-lane is open, fuel costs will continue to exert upper pressure on prices. This will make it very difficult for the Fed to rein in inflation via interest rate increases.
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