Core inflation’s slide sharpens bets on more mortgage relief next year
Inflation in the United States eased more than expected in November, strengthening the case for further Federal Reserve rate cuts in 2026 even as policymakers weighed data clouded by gaps from the recent government shutdown.
The Consumer Price Index rose 2.7% year over year in November, down from 3% in September and the lowest reading since July. Core inflation checked in at 2.6%, reinforcing a slow grind toward the Fed’s 2% target.
Shelter was up 3% and medical care up 2.9%. Used cars and trucks rose 3.6%, while household furnishings and operations jumped 4.6%.
Food prices increased 2.6% over the year. Food at home was up 1.9%, led by a 4.7% rise in meats, poultry, fish and eggs and a 4.3% gain in nonalcoholic beverages.
Cereals and bakery products rose 1.9%, while fruits and vegetables were nearly flat. Dairy and related products fell 1.6%. Food away from home rose 3.7%, including a 4.3% increase for full‑service meals.
Energy remained a notable pressure point, with the overall energy index up 4.2% over 12 months. Fuel oil surged 11.3%, electricity climbed 6.9% and natural gas rose 9.1%, while gasoline edged up 0.9%.
“November’s Consumer Price Index (CPI) offered reassurance that disinflation remains underway, though the message may be muddied by statistical gaps,” First American senior economist Sam Williamson said.
Williamson said the shutdown made the data harder to read, since the missing October figures could mean November understated the true pace of inflation and obscured the underlying trend.
“That uncertainty leaves the Federal Reserve inclined to treat the report cautiously and wait for cleaner data before determining its next policy move.”
At the same time, the labor market has softened. The US added 64,000 jobs in November, down from 119,000 in September, while unemployment ticked up to 4.6%, the highest since 2021.
U.S. jobs data show payrolls barely changed since April and unemployment rising to 4.6%, reinforcing expectations for further Fed rate cuts early next year. Mortgage rates remain near one-year lows, offering a stable backdrop for buyers.https://t.co/7tv05KTNjn
— Mortgage Professional America Magazine (@MPAMagazineUS) December 16, 2025
Some analysts said the slowdown, paired with cooler inflation, has left the Fed “stuck in a bind” between its inflation and employment mandates. “There’s no risk-free path for policy as we navigate this tension between our employment and inflation goals,” Fed chair Jerome Powell said last week.
“December’s CPI—set to arrive ahead of the next FOMC meeting—will be the more decisive signal,” Williamson said.
“For home buyers, that likely means mortgage rates won’t move much lower in the near term. But, if December’s report confirms the cooling trend, rates could begin drifting down early in the new year as markets price in a more dovish policy stance.”
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