CPI in Focus: Why Inflation Looks Stable

• EIA data showed gas prices were little changed year-over-year in November.

• NAR data shows house price growth was flat month-over-month.

• Fed survey data point to a drop in prices received.

Inflation growth held steady in November…

The Federal Reserve’s monetary policy meeting last week saw increasing dissension among policymakers. Three of the twelve voting members were against the 25 basis point reduction in interest rates. This outcome was a bit different than the last couple of meetings. Two of the officials voted in favor of not cutting. They voiced concern about the lack of progress made in fighting inflation.

Fed Chair Jerome Powell sees it differently. He noted that tariffs have pushed prices higher but argued the effect should be one‑off in nature. He expects that as we move into early next year, goods prices should peak unless new tariffs are imposed. That shift should help drive annualized price growth lower.

Right on cue, the Consumer Price Index (CPI) for November is set for release this Thursday. According to the Federal Reserve Bank of Cleveland, annualized inflation is expected to hold steady at 3% for the month…

Based on the data I follow, inflation growth likely eased last month. While the annual pace may still sit above the Fed’s 2% target, it is unlikely to derail the central bank’s path toward easing rates more by the end of 2026. That should help support a steady, long term rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

Gas Prices

One of the first places I look when gauging inflation is gasoline. It’s a line item that hits most of our wallets, as fuel in the tank lets us live our lives.

The chart below shows the Energy Information Administration’s (“EIA”) monthly gasoline price data, covering all grades. I use this broader measure because not everyone buys the same type of fuel. Looking at the full picture gives a better sense of how price changes affect everyone’s budget, not just one group.

Gas prices were little changed in November versus last year. The average cost per gallon was $3.18, compared to $3.175 a year ago, a 0.1% increase…

Historically, gas prices rise in early spring, peak in April, and then gradually ease through the rest of the year. For most of 2025, prices have been under pressure compared to 12 months ago. But notice the pace of contraction has been slowing. Pump prices saw a sharp drop in the back half of 2024. As we approach the end of this year, the annualized comparisons are becoming increasingly difficult. That makes it harder to see noticeable contraction.

Why does that matter? Because gas prices tend to lead headline CPI. If costs are rising elsewhere due to tariffs, the lack of price increases should help keep a lid on overall price growth. Still, the benefit won’t be as strong as it was in spring and early summer.

Prices Received

This next chart is a gauge I built using monthly manufacturing and services index data from regional Fed banks. They ask businesses whether activity is rising, falling, or holding steady, and then publish indexes to measure the change.

I’ve combined data from Dallas, Kansas City, New York, and Philadelphia. Together, these regions account for about 32% of national economic output. For this chart, I focused on prices received, a proxy for CPI. November marked the third straight monthly pullback. That hasn’t happened since late last year, when inflation growth was cooling…

I weighted the mix to 65% services and 35% manufacturing to reflect CPI composition. The November reading came in at 17.6, down from 18.9 in October. That’s more in line with spring levels. The driving factor was a drop in manufacturing prices, while the services sector experienced little change. So, I wouldn’t be surprised to see monthly growth in the 0.2% to 0.3% range for November.

House Prices

As I’ve been saying, house price growth is slowing—and that matters. Shelter accounts for 35% of CPI. Owners’ equivalent rent makes up 26%, while rent of primary residence adds another 7.5%. So, housing plays a big role.

The latest data from the National Association of Realtors (“NAR”) shows continued easing in existing home price growth…

In October, the median existing home price was just over $415,000, a 2% year-over-year increase. That’s similar to last month, but well below the typical 7%+ gains seen in prior years. On a month-over-month basis, prices were little changed.

Zooming out, the trend is clear. This marks the eighth straight month of sub-3% annualized price growth. We haven’t seen that since early 2023, when the Fed first signaled it would slow rate hikes. That should also help keep a lid on runaway prices.

Bringing It All Together

The Fed’s dual mandate is clear: stable prices and maximum employment. In short, it uses monetary policy to keep inflation in check while encouraging hiring.

Throughout this year, employment data has shown a sharp deceleration. Based on private market data released earlier this month, that trend continues.

So yes, the annualized pace of inflation growth may still sit above the Fed’s 2% target. But the underlying components suggest inflation is steady. If we see little change when the numbers are released later this week, it should signal to policymakers and investors that the recent rebound in prices has stabilized. If we start to see headway once more in early 2026, it should give policymakers room to ease rates further, supporting economic growth and a steady rally in the S&P 500.

If you'd like to see how I'd invest, check out the BentPine Growth Portfolio here.

Five Stories Moving the Market:

U.S. President Donald Trump said he was leaning toward choosing either former Fed governor Kevin Warsh or National Economic Council Director Kevin Hassett to lead the Federal Reserve next year; the president said Warsh was at the top of his list – WSJ. (Why you should care – while both have called for lower interest rates, Warsh has historically been known for hawkish tendencies)

Nvidia has told Chinese clients it is evaluating adding production capacity for its powerful H200 AI chips after orders exceeded its current output level; the U.S. government recently said it would allow Nvidia to export H200 processors, its second-fastest AI chips, to China and collect a 25% fee on such sales – Reuters. (Why you should care – stronger than anticipated demand from China for H200 chips would boost Nvidia’s revenue outlook)

The final flurry of global monetary policy decisions for 2025 is likely to showcase how the easing cycle in advanced economies either lacks fresh impetus or is effectively over; central bankers are stepping back to assess how their progress so far is impacting growth and inflation – Bloomberg. (Why you should care – without a further slowdown in inflation growth, global central banks may be increasingly cautious about easing policy further)

Federal Reserve Bank of Cleveland President Beth Hammack said she would prefer monetary policy to be tighter than it is currently; Hammack said interest rates are “right around a neutral” level – Reuters. (Why you should care – Hammack is a voter next year and one of the most hawkish Fed officials)

Federal Reserve Bank of Chicago President Austan Goolsbee, who voted against cutting interest rates last week, suggested his disagreement centered more on tactical considerations; he said the Fed could continue lowering rates but didn’t want to move so aggressively because inflation has been stubborn – WSJ. (Why you should care – this keeps with Goolsbee’s recent support for rate cuts in September and October)

Economic Calendar:

China – House Prices for November

China – Industrial Production, Retail Sales for November

China – Unemployment Rate for November

Japan – Tankan Big Manufacturing Outlook Index for 4Q

Eurozone – Industrial Production for October (5:00 a.m.)

U.K. – Bank of England Inflation Expectations (6:30 a.m.)

Canada – Housing Starts for November (8:15 a.m.)

U.S. – NY Empire State Manufacturing Index for December (8:30 a.m.)

Canada – CPI for November (8:30 a.m.)

U.S. – NAHB Housing Market Index for December (10:00 a.m.)

Fed’s Williams (New York, Voter) Speaks (10:30 a.m.)

Treasury Auctions $86 Billion in 13-Week Bills (11:30 a.m.)

Treasury Auctions $77 Billion in 26-Week Bills (11:30 a.m.)