US inflation rose 0.4% from September to October, slightly above economist expectations but marking a slowdown in price increases as gas costs fell during the month, according to the Bureau of Labor Statistics.
The government did not release the usual year-over-year inflation figure for October 2025, as data collection was halted during the government shutdown. Economists at Oxford Economics estimate the topline inflation rate for October 2026, if the data had been collected, would have been 3.9%, the highest since May 2026 when inflation reached 4.2%.
Energy prices drove much of October's increase, rising 0.7% after jumping 5.2% in September. The Iran war has pushed energy costs higher. Gas prices declined slightly during October, from an average of $4.41 a gallon early in the month to $4.22 by month's end, according to AAA. Prices remain more than $1 per gallon higher than a year ago. On Monday, average gas prices fell below $4 for the first time since July.
The Federal Reserve raised interest rates in September for the first time since 2023 and expects to hike rates again in December. Fed Chair Kevin Warsh said on October 28 that the central bank aims to prevent price increases in specific sectors from spreading across the economy. Fed Chair Kevin Warsh stated: "Our job is to ensure that relative price changes in some sectors do not broaden across the economy, and that inflation expectations remain as they are anchored."
Labor market growth exceeded economists' forecasts in October, with the unemployment rate hovering just above 4%, giving the Fed more room to raise rates. Consumer sentiment rose slightly at month's end as gas prices eased, though sentiment fell 5% for consumers with the largest stock portfolios amid stock market turbulence and investor concerns about AI spending levels.