As expectations for interest rate cuts fluctuate and the inflation path diverges again, the U.S. market is set to receive the last major macroeconomic data for 2025.
On Thursday local time (9:30 PM Beijing time), the U.S. Bureau of Labor Statistics (BLS) will release the November CPI data. Due to the cancellation of the October CPI, the BLS has made it clear: this report will not provide month-on-month data for November.
Analysts generally expect the year-on-year increase in the November CPI to expand to 3.1% (slightly higher than September's 3.0%), with the core CPI annualized expected to remain at 3.0%. Interactive Brokers senior economist José Torres stated that whether inflation readings fall within the "2% range or the 3% range will be crucial," and this psychological dividing line may affect the market's expectations for the Federal Reserve's policy path.
In short, if inflation returns to the 2% range, it will significantly boost risk appetite and may open up space for a 'Christmas rally' in US stocks at the end of the year; conversely, if it stabilizes above 3%, it will reinforce the narrative of 'higher rates for longer'.
The government shutdown has led to data anomalies, increasing interpretive difficulty.
Due to the lack of October benchmark data and limited time for data collection, analysts warn that this will not be a 'clean' report, potentially increasing interpretive difficulty and market volatility.
The U.S. Bureau of Labor Statistics has made it clear that due to partial missing data for October, the report will not include monthly month-on-month change data for November. This abnormal situation stems from the longest government shutdown in U.S. history lasting 43 days, which officially ended only after President Trump signed the funding bill on November 12.
Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, pointed out, "By the time the government actually reopens and begins collecting data, nearly half of November has passed, so only data from the latter half of the month can be obtained." This limitation in data collection timing may produce discrepancies in price performance between the latter and the former halves of the month.
The Bureau of Labor Statistics originally planned to release the November CPI report on December 10, but due to the impact of the government shutdown, it has been postponed to this Thursday.
Market expectations are diverging, with the key point being the psychological barrier of 3%.
Wall Street analysts have varied expectations for November inflation data. Economists surveyed by Dow Jones expect the annualized inflation rate to rise to 3.1%, while core CPI is expected to remain steady at 3.0%. However, Torres from Interactive Brokers expects actual data may fall below expectations, with both overall and core readings at 2.9%, though he believes the overall inflation rate could range between 2.9% and 3.1%.
In the absence of month-on-month data, Goldman Sachs uses the 'two-month average' from October to November to depict the trend: the two-month core CPI average month-on-month is about 0.21%, which means that the year-on-year core CPI for November may drop to 2.88%, below September's 3.02% and the market's general expectation of 3.0%.
This means that although the surface annual rate may 'rise', the underlying inflation momentum is still gently slowing. Structural clues that Goldman Sachs is watching include:
Car prices: used car prices have risen by about 0.5% on average over two months, while new car prices have seen a slight rebound.
Car insurance: online data points to a slight decline.
Airfare prices: under seasonal disturbances, base prices remain relatively strong.
Tariff impact: forms a temporary uplift on core inflation (two-month average of about +0.08 percentage points).
Data collection delay: may underestimate the downward impact of holiday discounts on clothing, home, and other categories on November inflation.
In terms of housing-related sub-items, Goldman Sachs expects a technical rebound after an earlier abnormal weakness, but this does not change the mid-term easing judgment; hotel prices may remain relatively strong.
Torres emphasized that if the inflation rate can fall to the 2% range rather than rise to the 3% range, it "will strengthen expectations for monetary policy easing in the last CPI report of 2025, as this will allow for more rate cuts next year." He believes a reading of 2.9% could clear the way for the so-called Santa Claus rally.
Due to the lack of month-on-month data, analysts believe that the market's sensitivity to this data may have already decreased, but Fernandez believes that the overall theme will still be 'inflation remains high' and has not returned to the 2% target as expected.
The key 'validation' in the Federal Reserve's policy considerations may exacerbate the hawk-dove divide.
For the Federal Reserve, the importance of this CPI lies in whether it validates existing judgments.
Recently, Powell has emphasized risks in the labor market, believing that the impact of tariffs on inflation is more likely to be temporary. If data skews hot, it will provide grounds for hawks advocating for inaction; if the annual rate falls back to the 2% range, it will help solidify expectations for further easing in 2026.
At the recent policy meeting, two members, Schmid and Goolsbee, voted against a rate cut. Goolsbee expressed a desire to wait for more information, particularly inflation data; Schmid believed there has been little change since October, the data remains incomplete, and he continues to hear concerns about inflation in his jurisdiction.
The Federal Reserve's November Beige Book shows that prices rose moderately during the reporting period ending November 17. The manufacturing and retail sectors are generally facing input cost pressures, primarily reflecting tariff-driven price increases. Multiple regions report rising costs for insurance, utilities, technology, and healthcare.
Pantheon Macroeconomics believes that as the contributions of housing and labor to inflation weaken, conditions are forming for the Federal Reserve to shift back to cutting rates in the first half of 2026, possibly as early as March.
