At 9:30 PM tonight, the US will release its CPI report without year-over-year data. What should investors watch for?

Due to missing data from last year's government shutdown, this report cannot provide the year-on-year inflation rate.

At 9:30 p.m. Tuesday, the U.S. Bureau of Labor Statistics will release October's Consumer Price Index (CPI). Investors will focus on whether prices, which have risen noticeably for two consecutive months, are beginning to cool, and whether the latest data could change the market's assessment of further Federal Reserve interest rate hikes.

A Reuters survey shows economists expect overall October CPI to rise 0.3% month over month, down from September's 0.6%; core CPI, excluding food and energy prices, is expected to increase 0.2% month over month, poised to post the smallest gain in three months.

There is a special consideration for this CPI report. Due to a U.S. federal government shutdown in October 2025, resulting in the absence of that month's CPI report, the Bureau of Labor Statistics lacks a reference period this time and cannot publish annual (year-on-year) inflation data. Monthly (month-over-month) figures will be released normally. Therefore, the market will rely more heavily on changes in headline and core CPI month over month, as well as specific price components, to assess inflation trends.

Additionally, this report will be the final CPI data before the Federal Reserve's December policy meeting (the next CPI release will come later on the day of the Fed's interest rate decision).

The previously released October nonfarm payroll report came in stronger than expected, further reinforcing the view that the U.S. economy remains resilient. For Wall Street, which is reassessing interest rate prospects, whether inflation can fall back as anticipated has become a key variable determining asset price trends in the next phase.

Inflation Expected to Cool, But Price Pressures Persist

Previously, the U.S. September CPI rose 0.6% month over month, marking the largest single-month gain since April, and two consecutive months of notable increases have deepened market concerns about the persistence of inflation.

Latest economist forecasts indicate that the pace of overall U.S. price increases in October may slow significantly. Core CPI is expected to rise 0.2% month over month, down from 0.3% in September. If the forecast materializes, it will provide some buffer to the previously continuous streak of strong inflation data.

Economists at Citigroup expect the pass-through of high energy costs to other goods prices to be relatively limited, and price increases in services will also remain moderate.

Bloomberg Economics forecasts that actual month-over-month headline CPI growth in October may be around 0.25%, with core CPI at approximately 0.24%. The research team believes that price increases for both goods and services may decelerate, with particular attention needed on changes in used car, consumer electronics, and housing-related services prices.

However, a decline in energy prices does not mean inflationary pressures have been alleviated. Although international oil prices dropped sharply last week to below $100 per barrel, cumulative gains year-to-date remain close to 60%, and natural gas prices are also far above their early-year levels.

Persistently high energy prices are driving up transportation, manufacturing, agricultural, and household expenditure costs. Whether companies can continue to absorb these costs, and whether they will pass on the pressure by raising goods and service prices, will influence inflation trends over the coming months.

Rising Corporate Inflation Concerns, Market Also Watches Price Pass-Through

Recent corporate earnings reflect that U.S. inflationary pressures are already affecting a wide range of industries.

Bloomberg statistics show that among S&P 500 component companies, the term "inflation" and related words were mentioned 820 times during October earnings conference calls, a level not seen since February 2024. Industrial companies accounted for about one-quarter of these mentions, reflecting pressure from rising energy and logistics costs.

General Motors expects that price increases in commodities, logistics, and memory chips will have an unfavorable impact of approximately $2 billion this year. Paint manufacturer PPG Industries stated it is considering raising product prices to mitigate raw material cost pressures.

Consumer goods companies face similar issues. Seasoning manufacturer McCormick warned that high freight costs and weak consumer spending are simultaneously impacting operations, and the company still needs to assess the inflation and cost outlook for 2027.

These corporate statements make the specific breakdown of the October CPI more instructive. If the energy price shock remains concentrated mainly in a few categories like gasoline, while core goods and services prices begin to decelerate, the market may view the risk of further inflation diffusion as eased. However, if housing, transportation, and other services prices continue to grow rapidly, inflation persistence will remain the Fed's primary challenge.

This Friday, the U.S. will also release October's Producer Price Index (PPI). Economists expect the year-on-year PPI increase to accelerate to 6.6%, reaching its highest level in nearly four years. This data will further reflect price pressures at the corporate production stage and provide supplementary basis for judging whether costs continue to pass through to consumers.

Will the Fed Raise Rates in December? CPI Will Provide Key Basis

The October CPI is under intense scrutiny, primarily because the Fed's monetary policy stance is being tested by persistent inflation.

The Federal Reserve held its benchmark interest rate steady at its late-October policy meeting, but some officials have already advocated for further tightening. The market currently anticipates the Fed might raise rates in December and continue hiking in March of next year.

Last Thursday, Cleveland Fed President Hamack stated that to timely bring inflation back to the 2% target, the Fed needs to adopt a restrictive monetary policy stance. She favors more frequent, smaller interest rate adjustments to reduce the risk of monetary policy lagging behind economic developments.

Hamack previously cast a dissenting vote during the Fed's interest rate decision last month. She argued that persistent supply shocks could lead businesses and consumers to gradually form stronger inflation expectations, increasing the difficulty for the central bank in stabilizing prices.

The latest employment data also presents the Fed with more direct policy choices. The U.S. reported a 165,000 increase in nonfarm payrolls in October on Friday last week, surpassing all market forecasts. Resilient job growth indicates the economy can still withstand higher borrowing costs, giving the Fed room to keep its policy focus on controlling inflation.

If October's core CPI comes in significantly below market expectations, investors may revise down their assessments of future rate hike magnitude or frequency. Conversely, if inflation once again exceeds expectations, the market may reassess how long rates will remain at elevated levels, potentially raising expectations for even tighter policy paths.

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