US consumer prices rose more than expected in October, pushing the benchmark 10-year Treasury yield above 5% and leaving traders almost certain the Federal Reserve will raise interest rates in December, according to Reuters and CNBC. The Bureau of Labor Statistics said the consumer price index rose 0.4% in October from September, against the 0.3% increase economists had forecast.
Core prices, which exclude food and energy, rose 0.3% in October, also above the 0.2% expected, according to CNBC. It was the third straight month core prices rose by exactly 0.3%, a persistence that unsettled markets because it suggests underlying inflation is not cooling. There was no annual inflation rate published this time: the BLS could not collect October 2025 prices during last year's government shutdown, so there is no comparison base, and the last published annual reading was September's 3.7%.
The bond market reacted sharply. The 10-year Treasury yield briefly traded above 5% during Tuesday's session before closing at about 4.99%, according to Reuters and CNBC, while the two-year yield, which tracks expectations for Fed policy, jumped about 18 basis points to roughly 4.73%, its biggest one-day move since the April 2025 tariff shock. The Treasury also sold $42 billion of 10-year notes on Tuesday at a high yield of 5.02%, which traders read as soft demand.
Fed Governor Christopher Waller had said before the report that a core reading of 0.3% or higher should put a half-point December rate rise on the table, according to Reuters. Markets now price about an 87% chance of a quarter-point rise at the Fed's 8–9 December meeting, with a smaller chance of a larger half-point move, according to CME FedWatch data cited in the reporting.
Stocks fell on the news on Tuesday, according to the Associated Press and Zacks. The S&P 500 lost 0.38% to close at 7,520.93, the Dow Jones Industrial Average fell 0.30% to 52,231.89, and the Nasdaq Composite dropped 0.74% to 25,065.87. The US bond market is closed on Wednesday for Veterans Day, so Tuesday's closing yields remain the last cash-market reference until trading resumes on Thursday.