US inflation slowed more than expected in November, giving the Federal Reserve room to consider further interest rate cuts in 2026, economists said.
The Consumer Price Index (CPI) rose 2.7% year-on-year, below economists’ expectations of 3%, while core CPI, which excludes volatile food and energy prices, increased 2.6% versus a forecast of 3%, the Labor Department reported.
“The CPI slowed sharply in November, and core CPI is the least since March 2021,” said Bill Adams, chief economist at Comerica Bank. “This bolsters the case for more Fed cuts in 2026.”
Shelter costs, which follow house prices and new lease rates with a lag, eased to their lowest pace since August 2021, reflecting the cooling housing market. Discounts on appliances and apparel during the early holiday shopping season also helped restrain core inflation.
However, economists cautioned that consumers might still feel the pinch of rising costs in essentials such as beef, coffee, home health services, car repairs, and utilities. “While cooler shelter inflation is a big help, prices of other essentials continue to rise rapidly,” Adams said.
Gina Bolvin, president of Bolvin Wealth Management Group, said the data confirmed that disinflation is taking hold. “This is the time to lean into growth with guardrails—be selective, be strategic, and stay ahead of the curve,” she said.
Jeffrey Roach, chief economist at LPL Financial, noted that several categories experienced outright deflation over the two-month period, including lodging away from home, recreation, and apparel. “Headline inflation increased 0.2% over the period, and core also rose 0.2%,” he said. “Investors cheered the report as yields fell on the news.”
Comerica forecasts the Fed will cut the federal funds rate by 0.75 percentage points in 2026, with most reductions expected after Chair Jerome Powell’s term ends in May.
Despite pockets of high inflation in certain essentials, the slower overall pace of price growth should support consumer purchasing power and spending, economists said, further easing pressure on monetary policy.