Despite previous criticism of Trump's tariffs for potentially increasing inflation, the latest CPI report shows unexpectedly low inflation rates, surprising economists and market observers, and suggesting a more favorable economic outlook.
NY Fed President John Williams stated that technical issues likely caused November's CPI to appear lower than it truly was, due to data collection disruptions in October and early November, leading to a potential downward bias in inflation readings.
The November inflation report shows a surprisingly low 2.7% increase, but economists criticize it for being distorted by data collection issues caused by the government shutdown, especially in housing costs, which are a major component of inflation. The report's reliability is questioned, and market reactions remain muted, with experts cautioning against drawing policy conclusions from these flawed numbers.
US inflation eased to 2.7% in November, with price increases slowing for items like hotels, milk, and clothing, potentially supporting further interest rate cuts by the Federal Reserve, despite some uncertainties due to recent data disruptions and mixed signals in housing costs and tariffs.
Inflation in November slowed to 2.7%, but economists caution this may be due to distortions from the government shutdown affecting data collection, making the recent figures potentially unreliable.
In November, U.S. consumer prices increased by 2.7% annually, lower than expected, suggesting easing inflation pressures and influencing expectations for potential monetary policy easing by the Federal Reserve. The report, affected by the government shutdown, showed cooler core CPI growth and boosted investor optimism, with stock futures rising.
The 10-year Treasury yield decreased to 4.127% following lighter-than-expected November inflation data, indicating cooling price pressures and potentially influencing Federal Reserve policy. The CPI rose 2.7% annually, below expectations, and core CPI increased 2.6%. Meanwhile, initial jobless claims fell to 224,000, suggesting a resilient labor market.
Wall Street is awaiting the November CPI report, the first after the government shutdown, with expectations of a 3.1% inflation rate, potentially lower, which could influence interest rate policies and market momentum for 2026. The report's timing and data collection issues due to the shutdown add uncertainty to its impact.
New softer-than-expected inflation data suggests the Federal Reserve may cut interest rates multiple times soon, as easing inflation provides the Fed with room to support economic growth while balancing its dual mandate of full employment and price stability.
Originally Published 2 months ago — by Wolf Street
The article discusses a significant outlier in the Owner's Equivalent of Rent (OER) component of the Consumer Price Index (CPI), which heavily influenced inflation readings in September 2023. Due to an anomaly, OER's minimal increase of 0.13% significantly lowered the overall CPI, core CPI, and core services CPI figures, potentially underestimating true inflation levels. Without this outlier, inflation would have appeared much higher, especially in core services, which are heavily weighted by housing costs.
The US inflation rate in September was 3.0%, lower than expected, with modest increases in prices for goods and services, influenced mainly by a rise in gasoline prices. This data, released during a government shutdown, is crucial for the Federal Reserve's upcoming interest rate decision, with markets anticipating a rate cut. Despite the subdued inflation, concerns about tariffs and labor market weakness persist.
US Treasuries saw gains in October with yields dropping below 4%, but upcoming September CPI data, expected to show a 0.4% increase, could disrupt this rally if it surprises on the upside, potentially leading to a reassessment of interest rate cuts and market stability.
The US government is releasing a delayed September inflation report, with economists predicting a 3.1% rise in the Consumer Price Index, the highest in 16 months, influenced by tariffs and supply chain factors. The inflation rate impacts Social Security benefits, expected to increase by around 2.7%. Despite recent rises, inflation is forecasted to ease next year, though risks remain if costs spill over into services.
Equities traders expect the upcoming CPI report to have minimal impact on the market, as optimism for a Federal Reserve rate cut next week dominates sentiment. Economists forecast a slight increase in core CPI, but market participants believe any inflation data will be offset by expectations of monetary easing, supporting a potential rally in the S&P 500 despite persistent inflation concerns.
The US will release September's CPI report on October 24 to determine the 2026 Social Security COLA, amid delays caused by a government shutdown affecting data collection, which may introduce volatility into the inflation data. The report's timing is crucial for benefits adjustments and upcoming Federal Reserve policy decisions.