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US CPI is expected to print at 3.0% y/y - why there may be limited potential for the inflation report to drop meaningfully below 3.0% any time soon.
US CPI Key Takeaways:
- US CPI expectations: 3.0% y/y headline inflation, 3.0% y/y core inflation
- Despite continued above-target inflation, the Fed’s concerns about the jobs market are more urgent, pointing to the potential for more interest rate cuts in 2026
- GBP/USD’s trend of higher highs and higher lows remains intact, though bulls won’t necessarily feel fully comfortable unless/until cable climbs back above 1.3440
When is the US CPI Report?
The US CPI report for November will be released at 8:30ET (13:30 GMT) on Thursday, December 18.
What Are the US CPI Report Expectations?
Traders and economists are projecting both headline and core CPI (ex-food and energy) to come in at 3.0% y/y. This reading, if seen, would match the price pressures seen in the most recent consumer inflation report in September (the October report will not be released due to the US government shutdown).
US CPI Forecast
As Federal Reserve Chairman Jerome Powell has noted in the last few press conferences, the central bank is in a difficult spot with the labor market deteriorating and inflation remaining stubbornly above target; this week’s CPI report could make that spot even tougher.
Broadly speaking, US consumer inflation has seen its decline toward the Fed’s 2% target stall for well over a year now, with headline CPI readings stuck between the 2.3% and 3.0% y/y range for that period. Meanwhile, Core CPI, which filters out more volatile food and energy prices to better show the underlying trend in prices, has turned higher in recent months after dropping as low as 2.8% y/y earlier this year.
Despite a prolonged period of above-target inflation, the Fed’s concerns about the jobs market are more urgent, and as a result, traders are pricing in roughly a 25% chance that the central bank will again cut interest rates in its first meeting of the year in late January:
Source: CME FedWatch
These implied odds rise closer to 50/50 if we look out to the March meeting, making that a more “live” meeting to monitor expectations around in the wake of this week’s inflation report.
As many readers know, the Fed technically focuses on a different measure of inflation, Core PCE, when setting its policy, but for traders, the CPI report is at least as significant because it’s released weeks earlier. As we noted above, CPI has generally ticked lower so far this year, but it remains stubbornly above the Fed’s 2% target:
Source: TradingView, StoneX
Looking at the chart above, the “Prices” components of the PMI reports have started to roll over in recent months, but inflation nonetheless remains below where those readings would historically imply, hinting that there may be limited potential for the inflation report to drop meaningfully below 3.0% any time soon.
US Dollar Technical Analysis – GBP/USD Daily Chart
Source: TradingView, StoneX
GBP/USD has a particularly interesting mix of fundamental and technical factors at play this week: Ahead of the US CPI report, the UK released its own CPI report, which came in substantially below expectations, potentially putting two BOE interest rate cuts on the table for next year. Meanwhile, the US CPI report will shape expectations for the Fed, with traders pricing in a similar amount of easing from the FOMC.
Technically speaking, the pair dropped below its near-term bullish channel this morning before recovering back toward 1.3400 as of writing. Generally speaking, the trend of higher highs and higher lows remains intact, though bulls won’t necessarily feel fully comfortable unless/until cable climbs back above 1.3440. Meanwhile, a close below the bullish channel could set the stage for an extension to previous support just below the 1.3300 handle.