The Federal Reserve has maintained that a 2% annual inflation rate is its goal. After months of inflation moving back up due to factors such as tariffs, reversing what looked like a slow but steady descent to 2%, the latest Consumer Price Index (CPI) published by the Bureau of Labor Statistics (BLS) saw a reversal of that trend.
In November 2025, the CPI’s all-items index measuring year-over-year inflation declined from 3% in September to 2.7%. (Due to the prolonged government shutdown, the Bureau did not release a monthly consumer price index report for October.) This mostly tracks with another primary inflation gauge, the Personal Consumption Expenditure (PCE) index, which saw a lower than expected reading in November.
The core CPI reading (excluding volatile food and energy prices) was 2.6%, the lowest annual reading since March 2021. At a seasonally adjusted rate, though, shelter inflation increased by 0.2% from September to November, with a 3% increase year-over-year.
In a statement, Realtor.com® Chief Economist Jake Krimmel characterized the CPI reading as a “welcome” surprise. The Federal Reserve, at its most recent Federal Open Market Committee (FOMC) meeting, chose to cut interest rates by a quarter basis point due to worrying signs from the labor market, despite reports of inflation trending higher.
If inflation is in fact trending downward, as this CPI suggests, then that reinforces that the labor market is the greater concern and could make the Fed less wary of more interest rate cuts next year, Krimmel said. Fed Governor Stephen Miran said in a speech this week that he specifically viewed the path of shelter inflation—meaning housing—as being on the right track, helping justify more rate cuts.
Lisa Sturtevant, chief economist at Bright MLS, also said in a statement that “if inflation is truly moving lower, the Fed may reconsider its rate cut strategy, and we could see more cuts and lower mortgage rates in 2026.”
However, Sturtevant also cautioned against viewing the November CPI results as a new trend just yet: “Despite the promising movement on inflation last month, today’s report represents one data point, and we are going to need to see a few more months of CPI data to understand whether inflation is moving in the right direction.”
Krimmel also noted that the government shutdown possibly impacted the data: “Much of the price collection occurred after mid-November when the government reopened, meaning the report does not reflect a full month and could understate some price gains.”
Sturtevant defined inflation as an “important factor to watch in the 2026 housing market,” due to both its impact on monetary policy and consumer confidence; if inflation is truly trending lower, it could entice more buyers into the market. Krimmel also called the results “cautiously optimistic” for the housing market.
“Early market reactions suggest mortgage rates could drift lower in the near term—though time will tell. That’s welcome relief for homebuyers on the margin heading into 2026. Still, lower rates are not a cure-all. Inflation may be cooling, but households continue to feel the cumulative impact of nearly five years of elevated prices, now paired with a softening labor market.”
For the full CPI, click here.
