The U.S. November CPI year-on-year growth rate accelerated to 2.7%, with a month-on-month increase of 0.3%, reaching a seven-month high, in line with expectations

In November, the U.S. CPI accelerated both year-on-year and month-on-month, while the core CPI's year-on-year and month-on-month growth rates remained the same as in October. These data points fully met expectations, reinforcing market predictions for a Federal Reserve rate cut in December.

On Wednesday, December 11, the U.S. Bureau of Labor Statistics released data showing that the U.S. CPI in November increased by 2.7% year-on-year, in line with expectations, compared to a previous value of 2.6%; the month-on-month CPI rose by 0.3%, up from 0.2% in October, marking the highest level since April of this year, also meeting expectations.

The core CPI, excluding food and energy costs, increased by 3.3% year-on-year in November, unchanged from October and in line with expectations; the month-on-month core CPI rose by 0.3%, with both the previous and expected values also at 0.3%, marking the fourth consecutive month of a 0.3% increase in the core CPI.

CPI Report Breakdown

One of the most stubborn sources of inflation data in the U.S. in recent years, the largest category in the service sector—housing costs—cooled somewhat in November, but this category still accounted for nearly 40% of the overall inflation increase. Housing prices rose by 0.3% in November, down from 0.4% in October. Among these, the owner's equivalent rent and primary residence rent both increased by only 0.2%, the smallest increase since 2021. The housing index rose by 4.7% on a 12-month basis in November.

Federal Reserve officials and many economists expect that inflation related to housing will ease as new lease agreements are negotiated, but the reality is that this item continues to rise each month.

According to Bloomberg's calculations, service prices excluding housing and energy rose by 0.3% for the second consecutive month. Although Federal Reserve officials emphasize the importance of this indicator when assessing overall inflation trends, they calculate this data based on another index—the Personal Consumption Expenditures Price Index (PCE), which does not place as much emphasis on housing as the CPI does, making it one reason why it is closer to the Fed's 2% target. The U.S. will release PPI data on Thursday, which will provide relevant data directly affecting personal consumption expenditures, including medical services, airfare, and portfolio management.

The CPI report shows that the cost of goods excluding food and energy rose by 0.3%, the largest increase since May 2023, primarily driven by home furnishings and clothing. This category has been a major driver of cooling inflation over the past year and a half.

Hotel accommodation prices reached a two-year high, and car prices also increased, possibly reflecting a temporary surge in demand following two hurricanes. Used car prices rose by 2% month-on-month, while new car prices increased by 0.6%, reversing the recent downward trend in prices for these goods Food grocery prices rose 0.5% in November, marking the largest increase since early last year. Food costs increased by 0.4% month-on-month and 2.4% year-on-year. According to data from the U.S. Bureau of Labor Statistics, the price index for grains and baked goods fell by 1.1% in November, marking the largest single-month decline in the history of this index since 1989.

The energy index rose by 0.2% month-on-month in November but fell by 3.2% year-on-year.

How does the market interpret this CPI report?

The U.S. November CPI data met expectations, and after the data was released, traders increased their bets on a Federal Reserve rate cut in December. The CME FedWatch tool showed that the market's bet on a December rate cut rose from 86.1% before the data release to 96.4%. The market also continues to expect that the Federal Reserve will not cut rates in January next year, although the likelihood of a January rate cut has slightly increased to about 23% after the CPI release.

Nick Timiraos, a well-known financial journalist known as the "new Federal Reserve correspondent," stated that the progress of U.S. inflation retreat stalled in November, with CPI rising to 2.7%, indicating that the path to reducing price pressures remains bumpy, and strengthening inflation poses challenges for Trump's new government and the Federal Reserve.

Some analysts pointed out that although price pressures have retreated from the peak during the pandemic, recent progress has flattened, intensifying concerns about a stagnation in the inflation containment process. Coupled with the fading market concerns about the labor market, this helps explain why several Federal Reserve officials advocate for a gradual rate-cutting pace.

There are also optimists. Citigroup economists Veronica Clark and Andrew Hollenhorst stated in a report that especially the slowdown in housing costs provides significant room for the Federal Reserve to lower the policy rate by 25 basis points in December and continue to cut rates in 2025.

Looking ahead, it remains to be seen to what extent the policy agenda of President-elect Trump will influence inflation trends. Although consumer confidence in the economy and personal finances has improved since his election, many economists say that some of Trump's campaign promises could further increase inflationary pressures. For example, some companies are considering raising prices due to anticipated higher tariffs. A rate cut by the Federal Reserve next week will give it enough flexibility in the new year to address potential inflationary rebounds, including the persistent stickiness of housing costs and changes in tariffs, taxes, and immigration policies.

Market Reaction

After the data was released, U.S. stock futures rose slightly, with the Nasdaq 100 futures increasing by 0.38%.

The US Dollar Index has slightly decreased in the short term, reporting at 106.52.

Spot gold has risen approximately $5 in the short term.

The yield on the US 10-year Treasury bond has decreased in the short term, reporting at 4.240%.