The Bureau of Labor Statistics reported November 2026 consumer prices on Thursday. Headline CPI came in at 3.1% year-on-year, down 0.1 percentage point from October. The decline was entirely driven by falling energy prices — gasoline fell 3.1% year-on-year. Strip out energy, and the underlying picture is more stubborn.

Shelter: the persistent drag

CPI shelter — which includes rent of primary residence and owners' equivalent rent (OER) — came in at 4.8% year-on-year. With a roughly 36% weight in core CPI, this single component contributed 1.7 percentage points to the 3.3% core rate. Without shelter, core CPI would be running at approximately 1.6% — well below the Fed's target.

The good news: shelter CPI is declining, down from a peak of 8.2% in early 2023. The mechanism is a lag — new lease agreements written in the private market are already growing at around 2% (per Zillow and Apartment List indices), but it takes 12–18 months for new leases to fully roll into the BLS's "stock" of rents. The shelter disinflation that is already baked in from 2025 private market data will continue feeding through into CPI through 2027. Our housing costs explainer covers the OER methodology in detail.

Super-core gives the Fed more comfort

The Federal Reserve focuses increasingly on "super-core" inflation — services CPI excluding shelter — as the cleanest signal of domestic wage-driven price pressure. November's super-core reading of 2.6% is the lowest since early 2021, suggesting that the wage-price dynamics that drove services inflation are genuinely cooling. Medical services, recreation, and transportation services all showed month-on-month deceleration.

If super-core continues its downward trajectory toward 2% and shelter continues its lagged decline, the math suggests headline and core CPI will reach 2.5% by mid-2027 even without further rate cuts. This is the central scenario priced into markets: a soft landing where inflation converges to target without a recession.

What November means for the December Fed meeting

The FOMC meets 16–17 December. November's CPI print — unchanged core, declining super-core — is mildly dovish but does not fundamentally change the calculus. The Fed had already signalled one cut in December and a slower pace in 2027. The PCE price index (released 19 December) carries more weight for the Fed and may adjust market expectations further. Markets are currently pricing a 75% probability of a 25 bp cut at December's meeting.