US consumer price inflation came in cooler than expected in November, offering a potential breather for markets and the Federal Reserve alike. Headline CPI fell to 2.7% year-on-year, down from 3.0% in September, while core inflation slipped to 2.6% from 3.1%, reflecting easing price pressures across major sectors.
Analysts caution that the figures should be interpreted carefully due to delayed data collection following the prolonged government shutdown. Nevertheless, the print, alongside earlier weak jobs numbers and upcoming GDP data, will play a crucial role in shaping the Fed’s policy outlook. While most market expectations point to just one or two rate cuts in 2026, shifts in economic indicators could prompt a reassessment.
Katy Stoves, Investment Manager at Mattioli Woods, on the US CPI figures announced today:
“US CPI fell unexpectedly to 2.7%. This represents continued progress from the peaks of 2023, though it still leaves inflation above the Federal Reserve’s 2% target and raises questions about the magnitude of future rate cuts.
Today’s data comes too late to influence this round of FOMC decisions, but it reinforces concerns about the Fed’s ability to navigate the current environment. Recent unemployment data has been guiding decision-making, but the picture here is unclear because of the longest-ever government shutdown and delayed DOGE-related efficiency cuts. Nevertheless, unemployment is creeping up from historically low levels, suggesting labour market conditions are softening. With data distortions still working through the system, the Fed is still flying with impaired vision.
Perhaps more significant than the data itself is the political backdrop. Fed Chair Jerome Powell has become something of a lame duck, with markets increasingly focused on speculation about his successor and how accommodative to Trump’s dovish view they might prove to be.”
Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund:
“The surprisingly low US headline inflation figure of 2.7% is good news for capital markets on different fronts, especially because it dropped further on the cost of shelter, the largest contributor, and all the other large contributors. It also takes some pressure off the Fed to keep rates high, and can alter perceptions on the Fed’s agenda for 2026.”
