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Inflation Report Released
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Inflation Report Released

November’s inflation report gave policymakers and markets something they haven’t had in a while: a moment to breathe — but not to celebrate.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.2% over the past two months and 2.7% on an annual basis. That’s a cooler reading than economists expected, and at face value, it looks like progress. But a deeper look reveals a landscape still marked by elevated costs, uneven recovery, and structural price imbalances that continue to weigh heavily on the American consumer.

Notably, core inflation — which strips out food and energy, the most volatile categories — was up 0.3% from the previous month and 2.6% year-over-year. It’s not enough to trigger alarms, but it’s certainly not enough to declare victory. Especially not when key categories like electricity (+6.9%), fuel oil (+11.3%), and motor vehicle maintenance (+6.9%) continue to climb faster than the broader index.

And while headline inflation appears to be easing, the underlying reality for households is still punishing — particularly for lower-income families. Food prices are up 2.6% over the past year, with meats, poultry, and fish jumping nearly 7%. Utility gas is up 9.1%, and housing — the single largest component of CPI — has risen 3% year-over-year. These are core living expenses, not discretionary splurges.


This fragile environment explains why the Federal Reserve moved last week to cut interest rates for a third consecutive time, despite inflation still running above its 2% target. That decision, driven in part by mounting concerns over labor market softening, places the Fed in a precarious position: easing policy just as inflation proves stickier than hoped.

Chair Jerome Powell framed the latest cut as a move toward “neutral,” suggesting that the central bank is adopting a wait-and-see stance. And with the November CPI data partially distorted by October’s prolonged government shutdown — which delayed the report and disrupted data collection — the Fed is rightly treating this latest release with caution.

Analysts are doing the same. Goldman Sachs’ Kay Haigh noted that “systematic biases” likely crept into the numbers due to the shutdown’s impact on data integrity, while Morgan Stanley’s Ellen Zentner pointed out that the inflation trend is directionally correct, but far from definitive. The Fed’s real bellwether will come in January, when the December CPI report lands just two weeks before the next FOMC meeting.

In the meantime, markets remain largely unmoved. As of this week, CME FedWatch pegged the likelihood of a rate hold at 73.4%, down only modestly from last week. Traders and economists seem to agree: this wasn’t a game-changer, but it nudged the door open for future cuts — a signal that could become more meaningful if January’s data confirms the downward trend.

Written by Arthur Higgens - December 18, 2025