Markets Rally as November Inflation Comes in Below Forecast at 2.7%

TLDR

• Consumer prices climbed 2.7% annually in November, missing the 3.1% economist forecast
• Core inflation posted a 2.6% year-over-year gain, also below the 3.1% projection
• The Bureau of Labor Statistics skipped October’s report due to the government shutdown
• Inflation readings stay above the Federal Reserve’s 2% target level
• Traders see just a 25% probability of an interest rate cut at the January Fed meeting

The Bureau of Labor Statistics published November inflation figures Thursday that came in lower than market expectations. Consumer prices increased at a more moderate pace than analysts had predicted for the month.

The Consumer Price Index registered a 2.7% gain versus the same month in 2024. Market watchers had anticipated a 3.1% jump according to Bloomberg consensus estimates. The figure represents a decline from the 3.0% increase recorded in September.

Core CPI, which strips out food and energy costs, posted a 2.6% annual advance in November. Economists had projected a 3.1% gain for this measure. Policymakers monitor core inflation closely as it filters out price categories with high volatility.

This marks the first inflation release since federal operations resumed following the shutdown. The statistics bureau canceled the October CPI report after being unable to gather full data during the 43-day government closure that occurred earlier in the year.

The partial data collection raises questions about accuracy. Goldman Sachs analysts pointed out that gathering prices only during November’s second half might skew results downward. Retailers typically launch major holiday discounts starting in mid-November, pushing goods prices lower.

Economic Reports Resume Regular Timeline

The November release concludes the period of disrupted economic data scheduling caused by the shutdown. Tuesday brought the November employment report, which revealed stronger job gains than expected alongside unemployment reaching its highest point in four years.

Standard release patterns return for major economic indicators moving forward. The employment report for December will publish on January 9, 2026, resuming its traditional Friday morning time slot.

Current inflation levels exceed the Federal Reserve’s stated goal of 2% for stable economic growth. The central bank uses the core personal consumption expenditures index as its preferred inflation gauge. The most recent core PCE reading from September, published this month, showed a 2.8% annual increase.

Interest Rate Cut Prospects Dim for January

LPL Financial’s chief economist Jeffrey Roach stated that while inflation exceeds the target, the situation should prove temporary. He forecasts that cooling demand will reduce pricing pressures in the months ahead.

Analysts at Bank of America wrote in a pre-release note that tariffs will keep goods inflation elevated. They anticipate services inflation will moderate, driven partly by changes in health insurance pricing.

The conflicting trends within inflation metrics point toward the Federal Reserve maintaining current policy at its January gathering. Market pricing shows only a one-in-four chance of a rate reduction next month.

Last week the Fed lowered rates by a quarter point, setting its benchmark lending rate between 3.5% and 3.75%. That action brought rates to their lowest since 2022. The central bank implemented rate cuts at its final three meetings of 2025.

The rate decision revealed splits among Fed officials. Three members issued formal dissents against the cut. Additional policymakers signaled concerns through their individual policy forecasts.

Recent Fed projections indicate just one additional rate cut planned for 2026. The November inflation data marks a decrease from September’s 3.0% readings for both headline and core metrics.

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