Price pressures have come down greatly over the last two years, but the lingering effects of higher rents just won't go away.

Why it matters: The rent effects will take time to roll off, and policymakers have confidence they can look past them, even with a slightly higher inflation reading.

The big picture: The overall trajectory for inflation looks solid, and a third consecutive Fed rate cut looks more likely than not in mid-December. But the latest data contains reminders that inflationary embers remain from the 2021-2022 price surge.

• It sets up a complicated policy landscape for 2025, as Fed officials decide how much further rates should come down without risking a reignition of inflation.
• It is made more complex by an uncertain outlook for immigration and trade policy under President-elect Trump (more on that below).

By the numbers: The Consumer Price Index ticked up to 2.6% over the 12 months ended in October, from 2.4% in September.

• Core inflation, excluding food and energy, was unchanged at 3.3%.
• A major culprit was a rebound in shelter inflation — primarily due to higher rents — up 0.4% in October alone and up 4.9% over the last year.
• There were also steep rises in airfares (up 3.2% in October alone) and used cars and trucks (2.7%).

Yes, but: The numbers came in broadly as expected, creating some relief after a few too-toasty-for-comfort inflation prints. That gave Wall Street some assurance that another rate cut is indeed on the way next month.

• Bond yields fell, and the market-based odds of a December rate cut rose to 82%, from 58% yesterday, per the CME FedWatch tool.

State of play: Housing has been the Achilles' heel of CPI data for the last couple of years. Market rents have been stable or even dropping, but as old leases roll over into higher-rent leases, CPI inflation has stayed high.

What they're saying: "Housing inflation is the elephant in the room," Kashkari adds. "We know mechanically [it] is going to take a couple of years for the new leases to work their way through."

• "So far, I think our broad disinflation story is still on track," he says.

For at least one Fed official, the word to describe the possible impact from Trump's policies: "uncertain."

Why it matters: Kashkari tells Axios it is too soon to say how plans at the heart of the president-elect's agenda — including deportations and across-the-board tariffs — will hit inflation and the labor market.

• It will be a huge question mark for the Fed in the months ahead as officials try to set policy.

What they're saying: "It's impossible to know at this stage what will actually get implemented, how aggressive [policies] will be," Kashkari says.

• "In political campaigns, candidates generally make broader declarations than what gets implemented — on both sides of the aisle," Kashkari adds.

On immigration, Kashkari says businesses would feel the effects of any mass deportation policy, though the extent of such effects is unknown.

• "If you assume undocumented immigrants are working, then if they are pulled out of the country, then businesses that are employing them would obviously face some disruptions," Kashkari says.
• He adds a caveat: "I have no idea how rapid this would be, how widespread it would be."

The intrigue: Kashkari says that companies across his district — which includes Montana, Minnesota, the Dakotas, and parts of Wisconsin and Michigan — are in favor of legal immigration.

• "Republicans and Democrats tell me the same thing: 'We need a lot more workers,'" Kashkari says.

On tariffs, Kashkari said the impact on inflation and Fed policy is similarly uncertain.

• "If it really is a one-time event, it should be a one-time price level change and not much impact on inflation expectations or the path of monetary policy," Kashkari says.
• "But that's all predicated on what are the other countries going to do in response?" he adds. "If there is a tit for tat, which is anybody's guess right now, then that could be different."