United States: Inflation Slowed Surprisingly, but Missing Data Keeps the Picture Unclear

Today’s US inflation data are rather unusual. First, what stands out is the sharp slowdown in both headline and core inflation. While annual changes hovered around 3% in both cases, their drop to 2.7% and 2.6%, respectively, is a major surprise—well below our expectations and those of the consensus.

The second point to consider is the lack of October data due to the federal shutdown, which prevented the survey from being conducted that month. We only have levels for a few components. For example, gasoline prices fell 2.1% in October before rebounding 3.0% in November. We also know that new vehicle prices posted slight increases (0.1% in October and 0.2% in November), while used vehicle prices rose more noticeably (+0.7% and +0.3%). Beyond that, it’s hard to tell whether most price movements occurred in October or November.

All we have is a two-month snapshot—and it’s quite striking. Average monthly changes for October and November show a clear slowdown compared to the first nine months of 2025. Some components have completely reversed course in the past two months. Grocery prices declined between September and November (average monthly change of -0.11%), whereas they had typically risen by about 0.5% in the previous two months. In housing, owners’ equivalent rent posted its weakest growth since the pandemic, and tenant rents their slowest pace since 2010! This contributed to the slowest monthly increase in core services prices (excluding energy) since January 2021. For core goods (excluding food and energy), recent monthly gains averaged just 0.03%, which is surprising given expectations that the Trump administration’s trade policy would exert more upward pressure on prices. It appears US importing firms are still absorbing tariff costs.

It’s difficult to draw clear conclusions about what recent consumer price movements signal for the US economy. That said, the recent slowdown in inflation, combined with relative labor market weakness, could strengthen the case for those on the Federal Reserve’s policy committee who favor further cuts to the federal funds rate.