US consumer prices rose 3.8% in the year to October, up from 3.7% in September, the Bureau of Labor Statistics said in Washington on Tuesday. The figure strengthened expectations that the Federal Reserve will raise interest rates again in December. Core inflation, which excludes food and energy, climbed to 2.7% from 2.6%.

On a monthly basis, the BLS said the consumer price index rose 0.3% in October, matching September's core increase. Energy costs and shelter were the largest contributors to the gain, according to the bureau. The release was the second consecutive month in which both headline and core measures moved higher.

The data followed Friday's October employment report from the Labor Department, which showed employers added 165,000 jobs, well above economists' forecasts of roughly 60,000. Unemployment fell to 4.1% from 4.2%. Together, the figures gave Federal Reserve policymakers little reason to believe that price pressures are fading or that the labor market is weakening.

The Fed raised its benchmark rate by a quarter point in September to a range of 3.75% to 4.00%, then held it in October by a 10-2 vote. After the CPI release, CME Group's FedWatch tool showed traders pricing a December hike as close to certain. Yields on two-year Treasury notes, which are most sensitive to policy expectations, rose in morning trading in New York.

The Federal Open Market Committee meets on 8 and 9 December, and will see November jobs data before that decision but November inflation data only after it. A further rise in core prices would make the Fed's second hike of the cycle more likely and keep borrowing costs for mortgages and businesses elevated into 2027.