We expect to see US core CPI inflation likely remained elevated at 0.33% m-o-m in November’24. We also expect to see the headline CPI remain elevated at .28% in Nov. Core goods inflation appears to have accelerated in November at .15% MoM against .05% MoM in Oct reading. Owners’ equivalent rent (OER) likely moderated only slightly in November after an acceleration in October. We expect super core CPI inflation inched lower to 0.30% m-o-m in November from 0.314% in October. Based on our forecast for CPI and PPI, we expect November core PCE inflation to be 0.26% m-o-m. This is a little lower than the October reading of 0.273%, but still well above 2.0% annualized. We think our CPI forecast is consistent with our expectation of a December skip on rate cut. Core CPI inflation has been elevated since August (and has printed above a 3% annualized pace in 9 of the past 12 months), suggesting that last-mile inflation issues remain unresolved. If our forecast materializes, three-month annualized core PCE inflation would have accelerated to 3.3% in November from 2.8% in October and 2.4% in September. Along with solid labor markets, November inflation data will likely push policymakers toward skipping a rate cut at the December FOMC meeting. We see a significant risk of media reporting during the blackout period or CPI/PPI next week delivering a hawkish surprise, pushing market expectations back toward a December skip. We assume tariffs will begin to be implemented in H1 2025, meaning the Fed may pause their easing cycle relatively soon. For 2025, we now expect only two rate cuts (in March and June).
