Inflation Eases To 2.7% And Wall Street Finds Some Breathing Room

U.S. inflation cooled more than expected in November, giving investors renewed confidence that price pressures are easing and strengthening expectations that the Federal Reserve's easing cycle can stay on track into 2026.

The Consumer Price Index rose 2.7% year over year in November 2025, the Bureau of Labor Statistics reported Thursday.

The reading marked a robust decline from September's 3% pace and came in below economists’ expectations of 3.1%.

Core inflation, which excludes food and energy, also surprised to the downside. Core CPI increased 2.6% year-over-year, below forecasts of 3% and hitting the lowest rate since March 2021.

Services inflation showed tentative signs of cooling. Prices excluding energy services rose 3% year over year, down from the prior reading. Shelter costs ? which account for nearly one-third of the CPI basket ? increased 3%, also edging lower.

The report did not include month-over-month changes for headline or core CPI. The October inflation release was canceled due to the government shutdown, and the Bureau of Labor Statistics said it was unable to retroactively collect the necessary data.

Ahead of the release, bond markets were pricing in a modest probability of a 25-basis-point rate cut at the Federal Reserve's Jan. 28 meeting.

Market Reactions: Stocks Rally, Treasury Yields Fall

U.S. stocks extended their rally in premarket trading Thursday, as cooler-than-expected inflation reinforced risk-on sentiment already fueled by Micron Technology Inc (MU).'s blowout earnings report.

Ahead of the opening bell, S&P 500 futures climbed 1%, while Nasdaq 100 futures surged 1.8%. The iShares Semiconductor ETF jumped 3.7%, on track to fully erase Tuesday's losses.

The U.S. dollar weakened as Treasury yields fell sharply across the curve. The 10-year Treasury yield slid 4 basis points to 4.11%.

Gold prices were little changed at $4,335 an ounce, while Bitcoin (CRYPTO: BTC) advanced 2.7% to nearly $89,000.

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