Consumer Price Index October and November 2025

Swiss cheese CPI report reveals downwardly biased inflation 

• The combined October and November Consumer Price Index (CPI) report wasn’t just noisy and full of gaps, it provided a downwardly biased perspective of inflation. The gaps in the data stemmed from the Bureau of Labor Statistics (BLS) being unable to collect October 2025 survey data due to the government shutdown. The downward bias stemmed from the carryforward methodology that assumed an unchanged price index in October for all surveyed data – imparting a downward bias to inflation dynamics.
   
• Still, if you squint hard enough, there are two potential signals, one red and one green. First, core goods price inflation reveals an ongoing uneven passthrough of tariffs onto consumer prices, rising 1.4% year over year (y/y) in November, vs. a historical deflationary trend. Second, core services inflation is easing at 3.0% y/y in November, providing a strong offset to the tariff-induced inflationary pressures. The caveat, however, is that the disinflationary trend was overstated in November due to the BLS carryforward imputations.
   
• Headline CPI rose by an average of just 0.1% month over month (m/m) in October and November, as higher average gains in energy costs and car prices were offset by softer shelter costs and declines in airline fares and auto insurance prices. Core CPI also saw a slight 0.1% m/m increase during this period – the smallest gain since April 2021. From September through November, headline inflation slowed by 0.3 percentage points to 2.7% y/y while core CPI eased by 0.4 percentage points to 2.6% y/y, both significantly below expectations.
   
• As noted, the details of the report were noisy and downwardly biased. Notably, several components, including food and shelter, posted their weakest readings since the pandemic. We don’t anticipate this marked softness to persist in the coming months. Food prices were flat over the two-month period, a sharp contrast with the 0.3% average gain in the prior three months. Shelter costs rose just 0.1% m/m compared with a 0.3% average gain heading into October/November. Overall, goods and services prices experienced downward pressures, with declines seen in apparel, recreational goods, hotels, airfare and auto insurance over the two-month period.
   
• The slowdown in short-term inflation dynamics likely exaggerates the extent of disinflation, but the six‑month horizon reveals a more stable underlying pattern. On a three-month annualized basis, headline inflation cooled by 1.2pp to 2.1% y/y in November while core inflation fell 1.5pp to 1.6% y/y. On a six-month annualized basis, headline inflation was unchanged at 2.8% and core inflation cooled 0.3pp to 2.6% y/y.
   
• Our view remains that the Fed will hold policy steady in January. The combined October-November inflation likely cracks the window open for a January cut, if taken at face value. But the technicalities and gaps in this report argue for putting it aside and waiting for the December report for more clarity.
   
• With Fed Chair Jerome Powell stating that the policy rate is now within a broad range of estimates of neutral, the Fed is well positioned to wait and observe incoming data. In general, we believe the combined October and November employment report strengthens the case for continued policy easing over time, but, while the Fed is under pressure to ease, it is not yet pressed to cut rates. We continue to expect 50 basis points of rate cuts next year.

The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.