As rate-cut expectations fluctuate and inflation paths diverge again, the U.S. market braces for the year's final major macroeconomic data release.

On Thursday local time (9:30 PM Beijing time), the Bureau of Labor Statistics (BLS) will unveil November's CPI figures. With October's CPI report canceled, the BLS has clarified that this release won't include month-over-month data for November.

Analysts broadly expect November's annual CPI to rise to 3.1% (slightly above September's 3.0%), while core CPI is projected to hold steady at 3.0%. José Torres, Senior Economist at Interactive Brokers, noted that whether inflation lands in the "2% range or 3% range will be critical," as this psychological threshold could sway market expectations for the Fed's policy trajectory.

In short, a return to the 2% range would significantly boost risk appetite and potentially open the door for a year-end "Santa Claus rally" in U.S. stocks. Conversely, staying above 3% would reinforce the "higher-for-longer" narrative.

**Government Shutdown Distorts Data, Complicates Interpretation** The absence of October baseline data and constrained collection timelines mean this won't be a "clean" report, analysts warn, likely amplifying interpretation challenges and market volatility.

The BLS has explicitly stated that due to partial October data gaps, the report won't include November's monthly change figures. This anomaly stems from the longest U.S. government shutdown in history—lasting 43 days until President Trump signed a funding bill on November 12.

Victoria Fernandez, Chief Market Strategist at Crossmark Global Investments, pointed out, "By the time the government reopened and began collecting data, nearly half of November had passed, leaving only the latter half's figures." This truncated collection window risks skewing price trends between the month's first and second halves.

Originally slated for December 10, the November CPI release was postponed to this Thursday due to shutdown impacts.

**Market Expectations Diverge at 3% Psychological Threshold** Wall Street analysts are split on November's inflation outlook. A Dow Jones survey shows economists expecting annualized inflation to climb to 3.1%, with core CPI holding at 3.0%. However, Torres forecasts both headline and core readings at 2.9%, though he sees a possible range of 2.9%–3.1%.

With monthly data missing, Goldman Sachs modeled a "two-month average" (October–November) to gauge trends: core CPI likely rose ~0.21% monthly on average, implying November's annual core CPI could dip to 2.88%—below September's 3.02% and consensus estimates of 3.0%.

This suggests that while surface-level annual rates may "creep up," underlying inflation momentum continues moderating. Goldman's structural insights include: - **Auto prices**: Used cars averaged ~0.5% monthly gains, new cars edged up slightly - **Auto insurance**: Online data hints at modest declines - **Airfares**: Seasonal noise masks still-strong base pricing - **Tariff effects**: Temporarily lifted core CPI (+0.08 ppt two-month average) - **Collection delays**: Likely undercounting holiday discounts (apparel, home goods)

For housing components, Goldman expects a technical rebound after prior weakness but maintains a medium-term easing outlook, while hotel prices may stay firm.

Torres stressed that slipping into the 2% range—not 3%—"would cement expectations for monetary policy easing in 2025's final CPI report, allowing more rate cuts next year." He sees 2.9% as potentially clearing the path for a Santa rally.

Despite muted sensitivity due to missing monthly data, Fernandez believes the overarching theme remains "sticky inflation," failing to revert to the 2% target as hoped.

**Fed's Key Validation Point: Hawk-Dove Divide May Widen** For the Fed, this CPI's significance lies in validating existing assessments.

Recently, Chair Powell has emphasized labor market risks, viewing tariff-driven inflation as likely transitory. Hotter data would bolster hawks advocating patience, while a 2-handle print could solidify 2026 easing expectations.

At the latest policy meeting, two voters—Schmid and Goolsbee—dissented against rate cuts. Goolsbee sought more data, especially on inflation; Schmid saw "little change" since October, citing incomplete data and persistent inflation concerns in his district.

The Fed's November Beige Book noted modest price rises through November 17, with manufacturing and retail facing input cost pressures—mainly tariff-driven. Multiple regions reported higher insurance, utilities, tech, and healthcare costs.

Pantheon Macroeconomics argues that as housing and labor's inflationary pull fades, conditions for Fed rate cuts in H1 2026—potentially as early as March—are taking shape.