By Andrew Moran
Price pressures may be cooling across the economy, with the 12‑month inflation rate slowing sharply in November.
The annual inflation rate eased to 2.7 percent last month—the lowest level since July—from 3 percent in September, according to the Bureau of Labor Statistics.
Economists had penciled in a reading of 3.1 percent.
The core consumer price index (CPI), which excludes volatile energy and food prices due to their noisy signals, also cooled to 2.6 percent from 3 percent in September. This represented the lowest reading since March 2021.
The market consensus was that core inflation would hold steady at 3 percent.
This is the first CPI report since the 43-day government shutdown. As a result, many typical data points were unavailable, and the one-month percent changes were not included because the October numbers are missing.
A federal funding lapse prevented the bureau from conducting its October 2025 survey, and the agency had no mechanism to obtain the data once operations resumed.
From September to November, the indexes for energy and shelter climbed 1.1 percent and 0.2 percent, respectively.
The food index ticked up 0.1 percent. Within this category, egg prices are down more than 13 percent year over year, but beef has surged about 15 percent.
Both kitchen staples have experienced tremendous volatility over the past year. The Avian flu outbreak caused egg prices to spike earlier this year, but they have since eased due to a blend of administration policy actions and market dynamics.
A mix of declining stocks and higher input costs has boosted beef prices, forcing the White House to increase imports from Argentina to ease consumer costs.
Tariff-sensitive items were little changed over the past 12 months.
The apparel index is up 0.2 percent year over year, while the new-vehicle index has risen 0.6 percent over the 12 months ending in November. Additionally, on an annualized basis, appliances have increased by 0.5 percent, smartphones have declined by 9.4 percent, and footwear has dipped by 0.1 percent.
Market Reaction
Investors cheered the lighter-than-expected November CPI report, which could bolster the odds of the Federal Reserve cutting interest rates.
The blue-chip Dow Jones Industrial Average advanced about 0.5 percent, while the tech-heavy Nasdaq Composite Index added 1.4 percent. The broader S&P 500 jumped 0.8 percent.
U.S. Treasury yields were firmly in the red, with the benchmark 10-year shedding about 3 basis points to around 4.12 percent. The 2-year yield, which typically tracks Fed policy expectations, declined more than 3 basis points to below 3.45 percent.
The U.S. dollar index, a measure of the greenback against a weighted basket of currencies, was little changed at 98.30. The index has fallen 9 percent this year.
“It always sounds smarter to predict trouble ahead, but this morning’s inflation data was much better than expected,” Chris Zaccarelli, CIO for Northlight Asset Management, said in a note emailed to The Epoch Times.
“Given that inflation is significantly lower month-over-month there is clearly room to keep cutting rates in order to support the labor market and if the doves win out then we are likely to see stock prices supported—and move higher —as the Fed continues to lower interest rates while the economy continues to grow.”
Underlying Inflation and the Fed
For almost five straight years, inflation has come in above the Federal Reserve’s 2 percent target.
After declining to 2.3 percent in April, it has steadily risen and reached 3 percent in September—the highest level since January.
Economic observers have attributed the increase, in part, to tariffs. However, when excluding higher import duties, inflation is closer to the low twos.
Fed Chairman Jerome Powell, speaking to reporters after the latest Fed meeting, said inflation will likely peak sometime in the first quarter of 2026.
“If there are no new tariff announcements … inflation from goods should peak in the first quarter or so,” Powell said, adding that it could start declining “in the back half of next year.”
Appearing at the Yale CEO Summit on Dec. 17, Fed Gov. Christopher Waller signaled he is a bit more optimistic, estimating that inflation will start coming down in the next three to four months.
“Inflation, I’m not particularly worried about,” Waller said.
Heading into 2026, inflation may already have reached its zenith. According to the Cleveland Fed Inflation Nowcasting Model, the annual inflation rate in the CPI report is expected to be 2.9 percent in December. Core inflation is also seen hovering around 3 percent.
The private sector also anticipates cooling inflation pressures in the coming months.
“Inflation is still above target, creating a second headwind, but this should be temporary,” Jeffrey Roach, chief economist at LPL Financial, said in a note emailed to The Epoch Times.
“As demand cools in the coming months, pricing pressures should ease, giving investors some breathing room.
“Our view is that inflation will materially ease throughout next year.”
Despite consumers expressing frustration over persistently high prices, LPL has also lowered its inflation outlook for the year ahead.
The preliminary December University of Michigan Consumer Sentiment Index’s one-year inflation outlook was trimmed to 4.1 percent from 4.5 percent in November—the lowest since January and sharply down from the year’s high of 6.6 percent.
Affordability has been a common theme in recent months, prompting President Donald Trump and senior administration officials to tout their efforts to ease price pressures.
Trump, in a Dec. 17 prime-time speech, said his administration “inherited a mess,” but is turning the United States into the “envy of the world” through a series of measures, including tariffs, tax breaks, and immigration reform.
“When I took office, inflation was the worst in 48 years, and some would say in the history of our country, which caused prices to be higher than ever before, making life unaffordable for millions and millions of Americans,” the president said.
“This happened during a Democrat administration, and it’s when we first began hearing the word ‘affordability.’”
The next major inflation report will be the December CPI data on Jan. 13.
