The truth about the US November CPI: surface-level 2.7% cooling, actual inflation remains sticky, and expectations for rate cuts are limited!

A detailed review of the November CPI report (annualized 2.7%, core 2.6%), appears optimistic on the surface but hides pitfalls: when combining data from October-November, there are gaps, reducing accuracy; overall inflation has decreased but services/housing remain sticky, and energy/goods (such as used cars up 3.6%) still face pressure. The actual benefits are limited, not supporting a rapid short-term rate cut, but combined with Tuesday’s employment data, still underpin expectations of easing by 2026. Looking ahead, December 1-12 data plus the new Fed Chair nomination—if inflation continues to decline, room for rate cuts may expand. Currently, the probability of a January rate cut has slightly increased to 28.8%, but before the yen rate hike boots land, the positive effects are discounted.

Overall Assessment of Inflation Data

Data collection issues and accuracy analysis

The report combines October-November data, but government shutdowns caused some gaps, leading to less clear statistics and reduced credibility. The following table summarizes key issues:

These issues make the apparent cooling “deceptive,” as the real economic picture is more complex.

Structural Inflation Concerns: Service and Goods Pressures Persist

Although overall inflation has declined, the structure is fractured: services/housing/medical/transportation/energy remain sticky, while used cars and other goods rose 3.6%. The table below compares key components:

These components show signs of re-inflation, with strong real price increases in goods.

Limited Actual Benefits: Slight Adjustment in Rate Cut Expectations

Surface data favors rate cuts, but due to statistical discounts and structural stickiness, actual support is limited. The probability of a January cut has risen from 26.6% to 28.8%, a modest increase. The short-term focus remains on the yen rate hike boots landing; the easing expectation cannot bring much benefit. In the long run, if December data continues to weaken (both inflation and employment), room for easing in 2026 will expand—plus, the new Fed Chair nomination will influence market sentiment.

Outlook and Risks for Easing in 2026

Along with Tuesday’s employment data, this CPI still supports the overall easing expectation for 2026. But if inflation components remain sticky (e.g., rebounds in goods/energy), the story of rapid rate cuts will be discounted. Moreover, if Trump’s tariffs and geopolitical conflicts intensify, genuine inflation could resurface. Investors should beware of statistical “illusions” and focus on real economic signals. Take it step by step—good data doesn’t mean inflation is dead; details determine the success or failure of easing!