Inflation ticked up in October. What’s next for interest rates?

Inflation is still a thing.
Prices were 2.6% higher in October than a year earlier, according to the latest Consumer Price Index, released Wednesday. That’s a much lower inflation rate than American consumers endured through most of 2022 and 2023, but it’s higher than the inflation rate for September, 2.4%.
Shelter prices rose 0.4% in October, accounting for more than half of the uptick in prices overall, the Bureau of Labor Statistics reported.
Lingering inflation illustrates that the nation’s inflation crisis is not over, economists said, and that the Federal Reserve’s battle against rising prices must rage on.
Inflation had barely registered on America’s radar in recent years. But prices spiked in the pandemic, and the annual inflation rate reached a 40-year high of 9.1% in mid-2022. The Fed stepped in, raising interest rates dramatically in 2022 and 2023 to cool the economy. Inflation retreated below 4% in mid-2023, but it still hovers above the 2% target set by federal regulators.
Capitalize on high interest rates: Best current CD rates
“The ‘last mile’ of progress in getting inflation back to 2% is proving to be a long and arduous one,” wrote Brian Coulton, Fitch Ratings chief economist, in response to the inflation report.
Enduring inflation remained top of mind for Americans headed to the polls for this year’s presidential election. In a CBS News exit poll, three-quarters of voters said inflation has been a hardship.  
While the pandemic-era inflation crisis has largely abated, prices remain sharply higher: 21.4% higher, since February 2020, according to an analysis by the personal finance site Bankrate. For supermarket shoppers, paying a dollar more for a box of cereal, an easing Consumer Price Index offers little consolation, economists say.
Prices rose dramatically in October in a few categories. Transportation services, a measure of household transportation costs, rose 8.2% on an annual basis. Shelter, the price of housing, rose 4.9%. Electricity rose 4.5%.
“The thorn in inflation’s side remains housing, and this is the primary source of the upside risk to our inflation forecast for 2025,” wrote Ryan Sweet, chief U.S. economist at Oxford Economics, in response to the report.
Other prices declined sharply. Gasoline was down 12.2% in the year ending October. Used car and truck prices slipped by 3.4%. Fuel oil plunged by 20.8%.
The inflation data perfectly matched forecasts, which predicted a slightly higher Consumer Price Index in October.
“The October CPI report will likely support the notion that the last mile of inflation’s journey back to target will be the hardest,” Wells Fargo economists wrote in a note to clients. 
The predicted uptick set off few alarm bells in economic circles. 
“This should be a relatively boring CPI report,” wrote Dean Baker, senior economist at the Center for Economic and Policy Research, in a Tuesday note.  
The September rate marked the lowest annual inflation rate since February 2021. Inflation has been drifting sporadically down toward 2%, the target set by the Federal Reserve. 
“Core” inflation, a measure that excludes volatile food and gas prices, rose at an annual rate of 3.3% in October, just as predicted. Core inflation remains elevated because of high prices for housing, insurance and other items. Food and energy prices are often more volatile because they respond to the price swings of global commodities like oil and wheat.
The inflation report provides the latest reading on consumer prices as the Federal Reserve mulls how to act on interest rates. 
With inflation cooling, the Fed has trimmed interest rates twice in recent months. The central bank cut rates by a quarter point in early November.   
The new inflation report will help the Fed decide whether to order another cut at its next meeting, in December.  
Most economists expect another reduction, but higher inflation might lead the Fed to hold off. 
Many economists predict that some of President-elect Donald Trump’s proposals, including aggressive import tariffs and tighter immigration policies, could trigger another inflation surge. 
The bond market faltered after Trump’s election, even while the stock market soared, signaling investor unease with the president-elect’s economic plans, some economists said.  
(This story was updated to add new information.)