- November 2025 CPI cooled more than expected (2.7% YoY; core 2.6%), but shutdown-related data gaps may be biasing the readings lower.
- Treasury yields fell on the report, with the 10-year around 4.12% and the 2-year near 3.46% as rate pressures appeared to ease.
- Analysts and Fed officials warn missing October data and disrupted housing-cost measures could make inflation look temporarily softer than reality.
- Markets are recalibrating the Fed path toward less tightening and possible cuts, while Christopher Waller is seen as a leading contender to succeed Powell in 2026 and has emphasized Fed independence.
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The U.S. November 2025 CPI data surprised markets by showing inflation cooling more sharply than anticipated—headline at 2.7% YoY vs. forecasted ~3.1%, core inflation (excluding food and energy) at 2.6% versus expectations around 3%. Treasury yields reacted quickly: the 10-year yield dropped over 3 basis points to ~4.12%, 2-year yields slipped to ~3.46%, and 30-year yields also fell, reflecting reduced near-term and long-term inflation and rate risk premia.
However, caveats abound. The report’s release was delayed by the 43-day government shutdown, which disrupted data collection, particularly the compilation of October figures and housing cost components such as owners’ equivalent rent (OER), a critical driver in both headline and core inflation. Sampling gaps, missing survey data, and substituted “nonsurvey data sources” increase the likelihood of underestimating inflation temporarily.
Monetary policy implications are significant. The apparent cooling gives the Federal Reserve less immediate pressure to hike rates further and offers justification for future rate cuts, but policy makers will likely tread carefully given distortions. Rate decisions in upcoming meetings will hinge on whether inflation remains soft once data collection normalizes. Market expectations are adjusting, but uncertainty remains high.
On the leadership front, Christopher Waller remains a frontrunner for the Fed Chair role starting May 2026. His recent statements defend central bank independence and show alignment with the need for easing policy if inflation behaves. His interactions with the Treasury as well as his public remarks suggest that while the administration is weighing several candidates, Waller’s profile and views could secure him the position—affecting market expectations, especially for rate policy continuity or modest tightening.
Strategic questions remain: how much inflation will rebound once October’s gap is filled? Will the labor market and wages follow suit? How will the Fed balance its policy path under potential political pressures from the administration? And crucially, will the incoming chair maintain or shift current policy trajectories?
Supporting Notes
- Headline CPI rose 2.7% YoY in November 2025; economists had expected around 3.1%.
- Core CPI (excluding food and energy) increased 2.6% YoY, below projections of ~3%.
- 10-year Treasury yield dropped more than 3 basis points to ~4.12%; 2-year yield pulled back to ~3.46%; 30-year yield also declined.
- The October CPI report was cancelled due to the 43-day government shutdown; missing housing cost data (owners’ equivalent rent) may have led to systematic underestimation.
- Waller met with Treasury Secretary Scott Bessent about his possible nomination as Fed Chair; he stressed defending the Fed’s independence.
- He reportedly had a “strong interview” with President Trump, bolstering his standing among contenders to succeed Powell in May 2026.