Last night's CPI data commentary
On December 18, 2025, the U.S. November CPI data was significantly lower than expected, igniting market optimism for a premature interest rate cut by the Federal Reserve, leading to a surge last night. However, due to last month's U.S. shutdown, the data is distorted, with missing October data making it impossible to conduct a month-to-month comparison, thus this impact is temporary, resulting in a midnight plunge.
CPI data overview:
The November CPI rose 2.7% year-on-year, and the core CPI rose 2.6% year-on-year, both lower than market expectations of 3.1% and 3.0%, marking the lowest levels since early 2021.
Housing inflation is cooling, and the momentum of price growth in goods and services is weakening, easing the stubborn components driving inflation.
Market reaction:
Interest rate cut expectations have significantly increased, with the probability of a rate cut in March 2026 rising from about 54% to 60%.
The CPI report acts like a “shot in the arm,” briefly reversing market sentiment and opening up imaginative space for rate cut expectations in the first half of 2026, though it has yet to provide decisive trend evidence.
Next:
Market focus will shift to the subsequent CPI data, especially the December data to be released in January 2026.
The Federal Reserve's policy path remains uncertain, and market optimism may remain cautious unless a trend is established.
In short, although the data provides support for interest rate cut expectations, this sentiment may be short-lived, and the specific direction still needs confirmation from subsequent data.
