CPI Report Casts Doubt on Rate Cuts in 2025: What the Experts Are Saying About Inflation

An inline reading for the November Consumer Price Index keeps the Federal Reserve on track for a quarter-point rate cut at its next policy meeting, but the outlook for borrowing costs next year is becoming less clear, experts say.

Among the unknowns are the ways in which a series of proposed tariffs could contribute to inflationary pressures.

For the record, headline CPI increased 0.3% month over month, a slight increase from the 0.2% rise seen in the previous four months. On an annual basis, headline CPI rose 2.7%, according to the Bureau of Labor Statistics, up from 2.6% in October.

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Although inflation accelerated on a year-over-year basis, the print essentially matched market forecasts.

Core CPI, which excludes food and energy costs and is considered a better indicator of future prices, also matched estimates. The gauge increased 0.3% in November, or the same rate seen over the previous three months. Annual core CPI advanced 3.3% to match consensus expectations.

"No news is good news," writes David Russell, global head of market strategy at TradeStation. "Inflation has stopped falling, but it isn't enough of a problem to derail this bull market. Inflation and the Fed are becoming less of a catalyst. Attention could now shift to the incoming administration’s tariff policy."

As of December 11, futures traders assigned a 95% probability to the Federal Open Market Committee (FOMC) cutting the short-term federal funds rate by 25 basis points (bps), or 0.25%, at the next Fed meeting. That's up from 78% a week ago, according to CME Group's FedWatch Tool. Odds of the Fed standing pat fell to 5% from 22% last week.

With the November CPI report now a matter of record, we turned to economists, strategists and other experts for their thoughts on what the data means for markets, macroeconomics and monetary policy going forward.

Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Expert takes on the CPI report

"No surprises from the CPI, so for now the Fed should be on course to cut rates again in December. Next year is a different story, though, given the uncertainty surrounding potential tariffs and other Trump administration policies. The markets are already weighing the possibility that the Fed will cut fewer times in 2025 than previously thought, and that they may hit the pause button as early as January." – Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management

"We're content with today's CPI release. While the headline reading did tick up 0.1% relative to last month, 2.7% is in line with expectation for today. Concerns about re-inflation have been top of mind as economic and equity growth has remained on a resiliently fast pace despite elevated short and long-term yields. Any reading that does not surprise to the upside is welcomed, as the last 1% of declines toward the 2% CPI target tends to be stubborn." – Ben Vaske, senior investment strategist at Orion Portfolio Solutions

"With both headline and core inflation in line with expectations, the Federal Reserve will likely still cut by 0.25% at its meeting next week. However, underlying inflation concerns could cause the Fed to pause any rate cuts at its January meeting." – David Royal, chief financial and investment officer at Thrivent

"Today's CPI print reinforces the current dilemma for effective monetary policy. The Fed is easing at a time where, on one hand, the 2-year Treasury rate remains lower than the overnight rate, which historically suggests that the market views Fed policy as too restrictive. Yet while inflation has cooled, it remains above the Fed's stated target. Further easing would be beneficial at the margin for consumer confidence and economic strength to the degree that key financing rates follow the overnight rate lower. Conversely, persistent inflation would weaken consumer confidence that has recently rebounded but remains on tenuous ground. Due to these conflicting forces, we view today's report as having a neutral influence on equity risk in the near term." – Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners

"We expect core PCE inflation to hover within a 2.5% to 3.0% range for most of 2025, preventing the FOMC from easing quickly enough to fully stabilize the deteriorating labor market. We continue to expect the FOMC to reduce the funds rate at alternate meetings next year, with the risks skewed towards an even slower pace of easing." – Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics

"These numbers were roughly in line with expectations, but they are still high relative to where the Fed wants them to be. The FOMC is expected to cut its target interest rate again at its next meeting this month, but FOMC members may want to reconsider that plan in light of today’s numbers." – Patrick Horan, macroeconomist at the Mercatus Center

"CPI as expected but the path to 2% remains uneven and might be slower than we expected a few months ago. Both headline and core were reported at up 0.3%, which puts the year-over-year number at 2.7% for headline and 3.3% for core inflation. This won't be enough to put the Fed off on cutting rates another 0.25% next week, yet the conversation at this point must be what changes to the rate path we can expect in 2025." – Steve Wyett, chief investment strategist at BOK Financial

"The November inflation report likely contained the last big data points that might color the Fed's imminent rate decision. In that regard, the report contained little that is likely to dissuade policymakers from trimming by another quarter point next week. The real questions relate to what comes next. The path for 2025 is less clear, but a course correction by the Fed toward holding rates a bit higher for a bit longer appears increasingly probable." – Jim Baird, chief investment officer at Plante Moran Financial Advisors

"We think the Fed will deliver a cut at next week's December meeting, with market expectations giving them 'permission' to do so. 2025's monetary policy decisions seem likely to be more contentious as fiscal and trade policy start a new chapter under the Trump administration. We think the Fed will move gradually, perhaps skipping January before cutting again in March." – Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management

"A Fed rate cut next week is likely a done deal, but today's inflation report could signal an early end to Fed policy easing. Shelter inflation was the lowest since early 2021, but goods inflation rose on the back of higher auto prices. With the incoming Trump administration likely to impose tariffs on imports and significantly tighten immigration policies, prices could re-accelerate further. If that's the case, December could represent the last cut in the easing cycle." – Ronald Temple, chief market strategist at Lazard

"The inflation number should be put in context. November last year was the second lowest in almost two-and-a-half years and an early indication that price stability was really improving. The slight uptick is probably not an indicator of a change in trend and is not reason to alter outlooks on equities or the Fed trajectory. Next year might prove to be a little more unsettling for prices with looming tariff increases impacting consumer prices and tax cuts fueling demand, but price stability has returned for now. Expect the Fed to cut 25 bps in December. Next year, three to four cuts are likely, but that could change." – Scott Helfstein, head of investment strategy at Global X

"Despite stubborn persistence in the headline and core CPI inflation data, today's report likely won't preclude the Federal Reserve from one more quarter point rate cut before the end of the year. Some FOMC members will likely take solace in the improvement in services and housing inflation. With that said, the Fed will need to see more improvement on the inflation front in the months ahead, if its plan for a steady pace of additional rate cuts next year is to be fulfilled. Large import tariffs at the beginning of next year could further aggravate the Fed's lingering inflation problem." – Scott Anderson, chief U.S. economist at BMO Capital Markets

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