Both November CPI and Core CPI Fall Short of Expectations
Concerns Over Data Incompleteness and Potential Distortion
Expectations for Rate Cuts Next Year Grow Stronger
The U.S. Consumer Price Index (CPI) growth rate for November slowed significantly, falling well below market expectations. While there are concerns about the incompleteness and potential distortion of the data due to the impact of the federal government shutdown (temporary suspension of operations), the lower-than-expected inflationary pressures have fueled hopes that the Federal Reserve (Fed) may adopt a more accommodative monetary policy next year than previously anticipated.
A woman is holding shopping bags amid the bustling crowd at Herald Square in Manhattan, New York, USA. Photo by AFP Yonhap News.
According to the U.S. Department of Labor on December 18 (local time), the CPI for November 2025 rose 2.7% year-on-year. This figure is lower than both the market expectation compiled by Dow Jones (3.1%) and the previous reading for September (3.0%). The October CPI was not released due to the federal government shutdown (temporary suspension of operations).
The core CPI, which excludes volatile energy and food prices, increased by 2.6% year-on-year. This result is below both the market expectation and the September figure (each at 3.0%), marking the lowest level since early 2021. The core CPI is considered a key indicator reflecting the underlying trend of inflation.
However, due to the ongoing effects of the shutdown since October, data collection was suspended, and as a result, the November CPI was also released in an incomplete state. This has made it difficult to fully assess month-on-month trends for each item. Looking at the details, gasoline prices rose 3.0% from the previous month, showing a relatively large increase. In contrast, new car prices rose by only 0.2%, and used cars and trucks by 0.3%, which partially limited the overall rise in prices.
As both the November CPI and core CPI came in below market expectations, hopes for monetary easing have increased further. While the Fed has been internally divided over policy priorities amid a phase of simultaneous labor market slowdown and high inflation, the latest inflation data confirmed that inflationary pressures are lower than anticipated. With companies taking a cautious approach to new hiring due to tariff hikes and economic uncertainty, some observers have predicted that this could dampen consumer sentiment and ease inflationary pressures. Consequently, there are expectations that the Fed may strengthen its policy stance with a greater emphasis on stabilizing the labor market.
However, some caution that it is difficult to conclude that a trend of slowing inflation has begun, given that it is not possible to confirm price trends compared to October.
According to CME FedWatch, the current interest rate futures market still sees the probability of a rate cut in January next year as below 30%, but the probability of a cut in March is reflected at nearly 60%.
Tom Lee, Head of Research at Fundstrat, said, "The moderate CPI trend will further strengthen the Fed's focus on protecting the labor market," adding, "This means that the so-called 'Fed put' (the stock market boost resulting from the Fed's accommodative monetary policy) is at work in the economy." He continued, "If the Fed is concerned about downside risks to the economy, the Fed put will be triggered, which could lead to a rise in the stock market."
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