U.S. November CPI Report Due Tonight – How Will It Impact Stocks and Fed Decisions?

Over the past few years, with stubbornly high U.S. inflation, one of the most closely watched federal economic releases for stock traders has been the CPI report.

 

Now, however, investors are approaching the upcoming inflation report with far less anxiety — most are largely indifferent.

 

Data compiled by Barclays shows options traders betting the S&P 500 will move within 0.7% on the day (Thursday). This is well below the 1% average actual volatility triggered by the previous 12 CPI reports through September this year.

 

The shift in sentiment makes sense. The Fed has recently focused more on signals of labor market weakness than on small inflation fluctuations. Tuesday’s data showed the U.S. job market remains sluggish, leaving room for rate cuts next year.

 

 

The November CPI report — originally due December 10 but delayed to Thursday — not only has less timeliness than usual but also carries risks of lower reliability due to survey disruptions from the government shutdown. Notably, the October CPI report was canceled entirely.

 

“The market has priced in that this data is either irrelevant or questionable in quality from a collection standpoint and won’t be overly scrutinized,” said Alexander Altmann, Barclays head of global equity tactical strategy.

 

The Bureau of Labor Statistics noted that without October data, this inflation report can only present a partial picture, unable to provide month-over-month comparisons for headline and core inflation indices.

Unlikely to sway Fed decisions

The upcoming CPI report is also unlikely to alter the outcome of the Fed’s January policy meeting — investors currently expect policymakers to hold rates steady then and await stronger data reflecting economic conditions. Last Wednesday, the Fed cut rates 25 bps as expected — its third consecutive cut.

 

“The potential outcomes have extremely limited impact on stocks,” said Greg Boutle, BNP Paribas head of U.S. equity and derivative strategy. “For CPI to matter, the threshold is very high — it would need a large deviation from expectations.”

 

This is largely because the Fed is watching downside risks in the job market at least as closely as — if not more than — the consumer price index. U.S. job growth remained weak in November, with unemployment hitting a four-year high, signaling continued cooling after a soft October.

 

Not all Fed officials prioritize the employment side of the dual mandate. Two officials dissented against last week’s cut, citing tariff impacts on prices. Atlanta Fed President Bostic said Tuesday that policymakers should stay focused on inflation, expecting elevated price pressures to persist through much of next year.

 

The last full CPI report investors received was at end-October, showing headline inflation at 3% — slightly above the Fed target but in line with expectations. Investors expect November figures to be similar.

 

“We don’t anticipate outliers this time,” said Chris Zaccarelli, CIO at Northlight Asset Management. He noted markets expect YoY CPI around 3%. A reading at 3.5% could catch traders off guard; likewise, a much better-than-expected figure — say 2.7% or lower — could surprise positively.

 

Another reason CPI importance has faded is Fed Chair Powell’s term ends in May next year. His successor is expected to strongly favor aggressive rate cuts to align with President Trump’s unconventional demands for deep easing — regardless of data.

 

“All inflation-related reports were critical this year, but as time passes and with President Trump set to appoint a new Fed chair, their importance has diminished,” said Jason Coogan, index options trader at Chicago market maker Simplex Trading.

 

Traders may also downplay the upcoming inflation data for seasonal reasons — after all, U.S. stocks are entering the traditionally bullish period.

 

“To me, current positioning sends a clear signal the market is betting stocks will march higher to new records,” Coogan said.