Wall Street got an early holiday surprise this week as fresh government data revealed U.S. inflation cooled more than expected in November, sending stocks soaring and igniting debate over the true state of the economy. The Consumer Price Index (CPI) for November, released December 18, 2025, showed prices rising just 2.7% year-over-year—a figure that fell short of the 3.1% most economists had forecast, according to the Bureau of Labor Statistics (BLS). This was the first time since April that inflation had slowed, and the news sent a wave of optimism through financial markets and the White House alike.
"Core inflation is at a new multi-year low, as prices for groceries, medicine, gas, airfare, car rentals, and hotels keep falling. Americans can expect this trend of lower prices and bigger paychecks to continue into the New Year!" White House press secretary Karoline Leavitt declared Thursday, touting the administration’s economic stewardship. The White House Council of Economic Advisers echoed her message, stating on social media, "This report is clear: prices are steady and wages are beating inflation," and pointing to improvements in groceries, airfares, and hotels.
Markets responded swiftly. The S&P 500 index, already buoyed by strong earnings from Micron Technology and positive initial jobless claims data, jumped more than 1% before settling up 0.8% for the day. Investors, who had expected the Federal Reserve to wait until June 2026 to lower interest rates, quickly recalibrated their bets, now anticipating a quarter-point rate cut as early as April.
Yet, as with most good news, there’s a catch. The November inflation report was anything but ordinary. The longest government shutdown in U.S. history earlier this fall had paused key data collection, resulting in no inflation report for October and data for November being gathered only after the government reopened—just in time for Black Friday sales. The BLS published technical explanations to clarify how these disruptions were handled, but many economists remain skeptical. Paul Ashworth, chief North America economist for Oxford Economics, wrote, "It’s possible that this does reflect a genuine drop off in inflationary pressures, but such a sudden stop, particularly in the more-persistent services components like rent of shelter is very unusual, at least outside of a recession."
Some of the skepticism centers on the report’s missing pieces. Key categories, especially shelter costs—which account for about a third of the CPI—were left blank or underreported because of the shutdown. Economist Omair Sharif of Inflation Insights noted, "Major issue was zeroing out rent/OER in Oct. That will artificially lower YoY rates until Apr (assuming no BLS adjustments). Other issue is weaker prints for a lot of core goods ex-autos due to price collection only in 2H Nov so more discounts/sale px. That should bounce in Dec."
Still, even with these caveats, the data showed some clear trends. Gasoline prices rose 0.9% over the past year as of November, while eggs were down a whopping 13.2% compared to a year earlier. Coffee, on the other hand, surged 18.8%, a jump attributed in part to tariffs imposed on major coffee-producing countries. Beef lovers felt the pinch, too: Uncooked ground beef prices shot up 14.9%, and beef steaks 14.7%. Electricity prices, meanwhile, climbed 6.9% year-over-year, outpacing overall inflation, as reported by the BLS and highlighted by multiple outlets including The New York Times and The Street.
Used car and truck prices increased 3.6% over the year, and new car prices edged up 0.2% from October and 0.6% over the past year. The average new car price topped $50,000 in October, driven in part by a rush to buy electric vehicles before a federal tax credit expired, according to Kelley Blue Book and cited by The New York Times.
President Donald Trump, in a televised address on December 17, insisted, "I am bringing those high prices down, and bringing them down very fast," despite federal data showing otherwise. Inflation, which had soared to a 40-year high of 9.1% in June 2022, fell back sharply but has remained stubbornly above the Federal Reserve’s 2% target. In November, prices were up 2.7% from a year earlier, down from 3% in September, but still a source of concern for many Americans. The unemployment rate also ticked up to 4.6% in November—a four-year high—even as the economy added 64,000 jobs after losing 105,000 in October.
Trump’s tariffs have played a controversial role in the inflation story. Although some items like coffee, bananas, and beef were eventually exempted, the overall effective tariff rate remains the highest since 1938. The Yale Budget Lab estimates that, even with exemptions, tariffs will cost the average American household an extra $1,700. According to The Guardian, recent polls show Trump’s net approval on prices has dropped more than on any other national issue, with Americans increasingly blaming tariffs for persistent price hikes.
The Federal Reserve, meanwhile, finds itself walking a tightrope. The central bank cut interest rates three times in 2025, most recently on December 10, but resisted Trump’s calls for deeper cuts. Interest rates now stand at 3.5% to 3.75%. Fed Chair Jerome Powell stated last week, "We are committed to 2% inflation, and we will deliver 2% inflation, but it is a complicated and difficult situation where the labor market is also under pressure." Powell also cautioned that November’s economic data should be "assessed carefully due to the government shutdown."
Despite all the uncertainty, the stock market has been on a tear. Since April, when Trump paused most reciprocal tariffs to facilitate negotiations, the S&P 500 has rallied nearly 30%, with year-to-date returns at 15.5%. According to FactSet, S&P 500 companies saw revenue rise 8.5% and earnings jump 13.6% in the third quarter. Wall Street analysts are now projecting 14.5% earnings growth in 2026.
Yet, as Kay Haigh of Goldman Sachs Asset Management pointed out, "Today’s low inflation reading won’t move the needle for the Fed given how noisy the data is. The Fed will instead focus on the December CPI released in mid-January, just two weeks before its next meeting, as a more accurate bellwether for inflation."
In Dallas and much of the South, inflation has been particularly tame—just 1.1% over the year—thanks in part to easing housing costs after the pandemic boom. But for many Americans, the pain of higher prices remains, especially for essentials like beef, coffee, and electricity. As the year draws to a close, investors, policymakers, and households alike are left to wonder: Is this the start of a lasting trend, or just a statistical blip caused by a tumultuous fall in Washington?
With so much riding on the next round of data, all eyes will be on the December CPI report. For now, the November numbers offer hope—but with a hefty dose of caution attached.
