The most surprising CPI report since pandemic has economists asking how numbers add up
The Bureau of Labor Statistics (BLS) surprised Wall Street on Thursday after reporting a sharper-than-expected slowdown in inflation, though the data was met with extreme skepticism rather than celebration.
According to BLS figures, the Consumer Price Index (CPI) cooled to a 2.7% annual rate in November, down from 3% in September. Core inflation, which excludes food and energy, rose 2.6% year over year, its lowest reading of the post-pandemic period since March 2021.
The report marked the first CPI release since the recent government shutdown, and economists said disruptions tied to the impasse likely distorted parts of the data.
Omair Sharif, founder of research firm Inflation Insights, called the report “totally inexcusable,” pointing specifically to the treatment of rent and owners’ equivalent rent (OER) in October, which appeared to be recorded at zero.
Rent and OER are among the largest components of the CPI basket, meaning even small anomalies can materially affect the overall inflation reading. A zero reading would imply no monthly increase at all — an outcome economists say is implausible given housing market conditions.
“I am sure they have a good technical explanation for this, but the only way you get a two-month average for rent of 0.06% and OER at 0.135% is by assuming October was zero,” Sharif said. “There is just no world in which this was a good idea, but here we are.”
Analysts at The Kobeissi Letter described the monthly report as “absolutely insane,” pointing to the sharp divergence between expectations for inflation to accelerate to 3.1% and the reported decline to 2.7%.
If the figures hold up under further scrutiny, they could shape expectations for Federal Reserve policy.
Will the CPI print influence the Fed?
Analysts at The Kobeissi Letter concluded their remarks by suggesting that “2026 is going to be a wild year” for financial markets, arguing that the latest CPI data points to underlying inflation moving closer to the central bank’s 2% target.
That target has eluded policymakers since early 2020, with elevated inflation a key reason interest rates were raised sharply and have remained high by recent historical standards.
“A tame CPI will reinforce [that] the Fed is focused on protecting the employment market,” said Fundstrat head of research Tom Lee. “And that means a Fed ‘put’ is now in place for the economy.”
The comments follow the latest U.S. jobs report, which showed a further uptick in unemployment and only a modest rebound in hiring, with job gains totaling 64,000 in November after a decline of 105,000 the prior month.
Immediately after the CPI release, traders began pricing in better-than-even odds of a March rate cut, according to CME Group’s FedWatch tool.