CPI Preview: Will inflation rear its head once again?
1min read The November Consumer Price Index (CPI) report is scheduled for release on Wednesday, December 11, at 8:30 AM ET. This report is a critical data point ahead of the Federal Reserve’s December meeting and is expected to provide insights into inflation trends and their impact on monetary policy.
Economists project headline CPI to rise 0.3% month-over-month (MoM) and 2.7% year-over-year (YoY), up slightly from October’s 2.6%. Core CPI, which excludes food and energy, is forecast to increase 0.3% MoM and 3.3% YoY, maintaining the same annual rate as in October. These estimates suggest inflation pressures remain sticky despite prior months of deceleration.
Key components to watch in the report include shelter costs, which have been a primary driver of core inflation, and services inflation, which remains persistent due to wage pressures. Energy prices, while excluded from the core measure, could also influence headline CPI and consumer sentiment. Additionally, base effects will play a role, with last November's 0.1% MoM reading dropping out of the annual calculation.
Recent inflation trends have been mixed, with headline inflation reaccelerating slightly after several months of consistent declines. Housing costs continue to anchor inflation at higher levels, while items like used cars, airline tickets, and car insurance are expected to contribute to November’s increase. Energy costs may also add modest upward pressure.
The report’s implications for monetary policy are significant. Markets currently price in an 85% probability of a 25-basis-point Fed rate cut at next week’s meeting. A hotter-than-expected CPI print could challenge these expectations, potentially delaying rate cuts into 2025 and raising uncertainty about the Fed’s dovish trajectory.
Financial markets are expected to respond sensitively to the report. An in-line or cooler reading could reinforce expectations of a December rate cut, likely weakening the dollar and boosting equities. Conversely, a stronger-than-expected print could trigger a rise in bond yields, weigh on stocks, and strengthen the dollar.
Shelter costs and services inflation will be scrutinized closely, given their outsized influence on core CPI. Any significant divergence from expectations in these components could shift market sentiment and Fed policy projections.
In summary, the November CPI report is poised to play a pivotal role in shaping market expectations and monetary policy decisions. With the Fed meeting looming, investors will closely analyze the data for signs of continued disinflation or persistent inflation pressures.