November Consumer Inflation Trails Views, Core CPI Hits Lowest Since 2021

10:31 AM EST, 12/18/2025 (MT Newswires) -- US consumer prices rose less than expected on an annual basis in November, while core inflation decelerated to the lowest since early 2021, likely keeping the door open for another interest rate cut by the Federal Reserve.

The consumer price index rose 2.7% year over year, the Bureau of Labor Statistics reported Thursday. That's below the Bloomberg-polled consensus indicating a 3.1% increase.

The BLS didn't collect survey data for October due to a federal government shutdown that ended last month. November's report was originally scheduled to be released on Dec. 10.

Inflation clocked in at 3% year on year in September.

Core CPI, which excludes food and energy prices, rose by 2.6%, lower than the consensus estimate that called for a 3% gain. Without taking into account October, that's the lowest since March 2021.

"A surprisingly sharp decline in US consumer price inflation should grease the wheels for further Fed easing in 2026," Sal Guatieri, senior economist at BMO Capital Markets, said in a report.

From September to November, consumer prices rose 0.2% on a seasonally-adjusted basis, with the core index rising by the same percentage.

"The November CPI report suggests that a loosening labor market and moderating wage growth, combined with limited pass-through of tariffs and moderating shelter costs, are finally corralling inflation," Guatieri said. "The (Federal Open Market Committee) will take much comfort from the report, allowing it to focus on addressing the weakness in labor markets."

The odds of a 25-basis-point rate cut next month rose to about 27% on Thursday from 24% on Wednesday, according to the CME FedWatch tool. Markets are pricing in a 73% probability that the central bank will hold rates steady, down from Wednesday's nearly 76%.

On Wednesday, Fed Governor Christopher Waller said the US central bank can afford to ease policy further amid continued concerns regarding the labor market. He said he was "not particularly worried" about inflation still being above the FOMC's 2% target as prices will likely start coming down in the next three to four months.

Waller is among the potential candidates to replace Jerome Powell when Powell's term as Fed chair expires in May.

"Powell already warned that near-term data could suffer from distortions, suggesting Fed officials won't put too much emphasis on one month's data," Thomas Feltmate, senior economist at TD Economics, said in a report. "That said, should inflation show further signs of cooling in the months ahead, it certainly raises the odds that the timing of further rate cuts is pulled forward, particularly if the labor market were to also show further signs of softening."

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