Implications:  Consumer prices surged in October, rising 0.4%, coming on the heels of healthy increases in both August and September.  Although consumer prices are up only a tame 1.6% in the past year, they're up at a 2.5% annual rate in the past six months and a 3.5% annual rate in the past three months (the fastest three-month pace since 2012).  Energy prices led the index higher in October, as gasoline jumped 7%.  As we saw earlier this week in retail sales as well as both import and producer prices, consumer energy prices turned positive on a year-to-year basis for the first time since mid-2014.  In other words, the key headwind on inflation we have seen over the past two years is now turning into a tailwind.  Conversely, food prices, unchanged in October for a fourth consecutive months., remain a slight drag on overall inflation, and are down 0.3% in the past year.  Stripping out the typically volatile food and energy components, "core" consumer prices rose 0.1% in October and are up 2.1% in the past year.  The October increase in "core" consumer prices was led by housing.  Owners' equivalent rent, which makes up about ¼ of the CPI, rose 0.3% in October, is up 3.4% in the past year, and will be a key source of higher inflation in the year ahead.  Medical care costs took a breather in October but continue to be an area to watch, up 4.3% in the past year and showing acceleration over the past three- and six-month periods.  In addition to rising inflation, "real" (inflation-adjusted) average hourly earnings also rose in October, up 0.1%, and are 1.2% higher in the past year.  Along with other recent readings on inflation - and employment continuing to show health gains - today's CPI report should remove any doubt in the Fed's mind that a December rate hike is needed.

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