October core CPI rose 0.3% again, and the chance of a half-point Fed increase jumped

Core prices, excluding food and energy, rose 0.3% in October for a third straight month. Hours earlier, U.S. Federal Reserve Governor Christopher J. Waller had said a reading around that level should put a half-point rate increase on the table in December.

CNBC reported Tuesday morning that traders were treating a quarter-point increase at the Fed's Dec. 8-9 meeting as certain, and put the chance of a half-point increase at 13.6%, up from around zero before the release. The odds come from CME Group's FedWatch, a reading of interest-rate futures.

Waller was speaking in London, before the 8:30 a.m. Eastern time release. He said he would support a quarter-point increase in December even if the October reading improved, and that a half-point increase should be considered if core inflation was around 0.3% or higher, as in August and September.

"In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting," he said.

That 50 basis point increase is half a percentage point, twice the quarter-point increase.

The Fed held its benchmark rate at 3.75% to 4% on Oct. 28, after a quarter-point increase in September. Waller said he had supported leaving the rate unchanged.

Inside the October CPI report

The consumer price index rose a seasonally adjusted 0.4% in October from September, the U.S. Bureau of Labor Statistics said, after 0.6% in September. The core index rose 0.3%, as it did in September and August. Economists surveyed by Dow Jones had expected 0.3% for the headline index, and the forecast for core was 0.2%, CNBC reported.

On the same seasonally adjusted basis, energy rose 0.7% after a 5.2% increase in September, so it did much less of the work in the monthly gain. Gasoline rose 1.0% after 9.1%.

Food rose 0.5% after being unchanged in September, so the slower monthly gain was not across the board.

Shelter, which sits inside the core index, rose 0.3% after 0.4% in September and accounted for more than 30% of the increase in overall prices. Owners' equivalent rent, the implied rent on owner-occupied homes, rose 0.3%. Rent of primary residence rose 0.2%.

The bureau published no change from a year earlier. Last year's government shutdown kept it from collecting October 2025 prices, and it said it could not publish a 12-month change for most of the index.

In its Oct. 14 release, overall prices were up 3.7% in the year through September, from 3.4% through August, and core prices were up 2.6%, from 2.4% through August.

The Fed targets a different gauge. Waller said personal consumption expenditures prices rose 3.7% in the year through September, and 3.1% excluding food and energy, and he called both too high. Inflation, he said, is well above the Fed's 2% goal.

Treasury yields and bond funds

By 10:53 a.m. Eastern time, the 10-year Treasury yield was 4.993%, up 13.3 basis points from Monday's close. Not all of that came after the inflation report. Dow Jones reported at 5:34 a.m. Eastern time that the yield was already up 2.4 basis points, at 4.885%, after Waller's remarks and before the release.

Bond prices move the other way from yields, and longer-term bonds move more, because their payments stretch further out. At the same time, BlackRock's iShares 20+ Year Treasury Bond ETF TLT was down 1.3%. The same firm's iShares 7-10 Year Treasury Bond ETF IEF was down 0.9%, and its iShares 1-3 Year Treasury Bond ETF SHY was down 0.3%.