US inflation cooled more than expected in November, offering fresh relief to markets and policymakers. The latest data shows a broad-based slowdown in price pressures across the American economy.
November CPI Data: Key Highlights
- Headline CPI: 2.7% year-on-year (vs 3.1% expected)
- Core CPI: 2.6% year-on-year (vs 3.0% expected)
- Biggest inflation drop since: March 2025
- Lowest core inflation level since: March 2021
Both headline and core inflation came in well below forecasts, marking a clear downside surprise. This confirms that disinflationary forces are gaining momentum in the United States.
Market Reaction Remains Measured
Financial markets reacted cautiously to the softer inflation print. While the data supports an easing trend, investors remain divided on the timing of the first rate cut.
According to Kalshi pricing, the probability of a 25 basis point Federal Reserve rate cut in January 2026 has increased, although a policy hold is still seen as the most likely outcome.
Bond Market Signals: Yields Move Lower
- 2-Year US Treasury Yield: Down 3.3 basis points to 3.452%
- 2Y–10Y Yield Curve: Positive at 66.5 basis points
Falling short-term yields reflect growing confidence that inflation is cooling faster than expected. The positive yield curve also signals improving economic balance conditions.
U.S. Grocery Prices: One-Year Snapshot
U.S. food prices rose moderately over the past year, with the overall food index up 2.6%. Prices for food eaten at home increased 1.9%, led by higher costs for meats, poultry, fish and eggs (+4.7%) and nonalcoholic beverages (+4.3%). Cereals and bakery items rose 1.9%, fruits and vegetables were nearly flat (+0.1%), while dairy prices declined 1.6%.
What This Means for the Federal Reserve
The November inflation data strengthens the case for monetary easing in the coming months. However, January remains a borderline decision for the Fed, as policymakers will want to see continued progress before acting.
If inflation continues to slow at this pace, rate cuts later in 2026 could become more likely, supporting growth while keeping price stability intact.
Analysts See Cooler CPI, But With Caveats
Analysts say November’s softer U.S. CPI points to changing inflation drivers, with rent and used cars no longer the main pressures. Annex Wealth’s Brian Jacobsen said the data shouldn’t be ignored, noting mild inflation and rising unemployment could give the Fed room to cut rates.
However, others urge caution. Goldman Sachs’ Kay Haigh said the shutdown-distorted data and missing monthly figures limit its impact on policy, with the Fed likely focusing on December CPI instead.
B. Riley’s Art Hogan called the report positive but flawed, citing statistical adjustments and extended Black Friday effects, saying the data comes “with an asterisk.”
Cooling Inflation Shapes Global Rate Cut Outlook
Goldman Sachs now expects the Bank of England to cut rates by 25 bps in March, June and September 2026, shifting from its earlier call for cuts in February, April and July, signaling a slower and more spaced easing path.
In the U.S., inflation eased to its slowest pace since early 2021. Core CPI rose 2.6% YoY in November, while headline CPI increased 2.7%, reinforcing the disinflation trend.
However, policymakers remain cautious. Fed Chair Jerome Powell said the data may be distorted due to the record-long government shutdown, limiting its immediate influence on policy decisions.
Analyst Flags Distortion in November CPI
Analyst Omair Sharif questioned the accuracy of the November CPI, saying the BLS assumed rent and owners’ equivalent rent (OER) were zero in October. While this may have a technical explanation, he noted the assumption likely distorted the overall inflation picture.
Conclusion
November’s CPI report marks a major milestone in the US inflation story. With both headline and core inflation falling sharply, the data reinforces confidence that inflation is moving back toward the Federal Reserve’s target.
While markets are not yet pricing in immediate action, the trend clearly favors a more accommodative policy outlook in the months ahead.
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