US CPI Misses Forecasts, Strengthening Case for Further Fed Rate Cuts

Energy and Shelter Remain Key Contributors Energy prices remain a notable upside factor, with the energy index up 4.2% year over year. Electricity prices climbed 6.9%, while natural gas surged 9.1%, highlighting ongoing cost pressure for households and utilities. Shelter inflation eased but remained firm at 3.0% annually, confirming that housing costs are slowing gradually rather than collapsing. These components continue to shape inflation persistence even as broader price growth cools.

Services Inflation Moderates as Goods Stay Contained Services excluding energy rose 3.0% over the past year, signaling moderation compared with earlier readings. Medical care services increased by 3.3%, while transportation services advanced by 1.7%. Goods inflation remained contained, with commodities excluding food and energy up just 1.4% year over year. Used cars and trucks rose 3.6%, but apparel prices increased only 0.2%, underscoring limited pricing power outside select categories.

Federal Reserve Signal Turns More Supportive The softer CPI print follows the Fed’s third consecutive 25-basis-point rate cut earlier this month. Market participants increasingly view the central bank as prioritizing labor market stability as inflation trends lower. Equity investors interpreted the data as reinforcing a policy backstop, while bond markets leaned toward expectations that easing may extend further than previously priced.

Market Forecast: Short-Term Bullish Bias The November CPI report supports a short-term bullish bias for risk assets. Cooling headlines and core inflation strengthen the case for continued Federal Reserve easing, improving sentiment across equities and credit while keeping pressure on yields. Unless upcoming data reverse this trend, markets are likely to favor growth exposure and rate-sensitive sectors in the near term.