We expect the two-month average of our forecast for October and November core CPI inflation at 0.24% m-o-m, a slight acceleration from a 0.227% advance in September. Our forecast translates into a 3.0% y-o-y change in core CPI for November. The BLS will not release October CPI, except for certain components. We expect the Nov core CPI at .26% MoM & the Oct core CPI at .22% MoM. We expect core goods inflation remained strong due to tariff effects as well as higher used vehicle prices. Although US tariff policy has de-escalated in recent months, we expect the lagged impact of past tariff increases will exert upward pressure until Q1 next year. Super-core service inflation likely slowed due to lower health insurance prices and other volatile service prices, while inflation of rent-related components likely rebounded after a temporary slowdown in September. The government shutdown shortened the data collection period for November. Typically, a month is divided into three pricing periods: the first ten days, the second ten days and the third ten days of the month. Considering the government shutdown ended on 12 November, the data sample for November CPI seems to be more concentrated on price quotes collected during the H2 of the month. If seasonal price discounts became more pronounced in late November, the shortened sample period might have created a downward bias. Summary: The Nov CPI print won’t move the needle for fed rate cut pricing significantly if the data comes as per our expectations. We continue to expect two more rate cuts of 25 bps each in CY26, one in the 17th June FOMC meeting & the last cut in the 16th Sep FOMC meeting. We expect long end UST yields to eventually move northwards to our target of 4.3%. On 9th Nov, we had released the following trade recommendation on selling 10yr USTs: https://macro-spectrum.com/trade-recommendation/sell-10yr-ust At the time of above trade recommendation, 10yr UST yield was 4.08 and currently it is at 4.18.
