The U.S. Bureau of Labor Statistics released its belated November report on December 18th.
December 2025 inflation data reveals moderating inflation. But the FED is easing, which could result in inflationary pressures later in 2026.
Calculated to two digits, inflation was 2.74% in November, down from 3.01% in September. There was no October number due to the government shutdown.
The December 2025 inflation report shows that U.S. consumer prices continued to moderate at the end of the year, with the Consumer Price Index (CPI) rising modestly compared to the previous year. After months of mixed data and reporting gaps tied to the federal government shutdown, inflation trends appear to be stabilizing, though economists remain cautious about seasonal effects and data volatility. Key drivers included slower increases in shelter and food prices, while core measures excluding food and energy remained a focal point for policymakers and markets alike.
November 2025 Inflation Summary:
Annual Inflation… 2.74% in November 2025
- Annual Inflation fell from 3.01% in September
- CPI Index fell from 324.800 in September to 324.122 (Disinflation)
- Monthly Inflation for October and November is unavailable
(Due to the Government shutdown) - Next release January 13th, 2026
Annual Inflation Table
BLS Commentary:
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis over the 2 months from September 2025 to November 2025, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 2.7 percent before seasonal adjustment. BLS did not collect survey data for October 2025 due to a lapse in appropriations.
The seasonally adjusted index for all items less food and energy rose 0.2 percent over the 2 months ending in November. From September to November, the index for shelter increased 0.2 percent. The energy index rose 1.1 percent over the same 2-month period, and the food index increased 0.1 percent. Other indexes which increased over the 2 months ending in November include household furnishings and operations, communication, and personal care. In contrast, the indexes for lodging away from home, recreation, and apparel decreased over the same 2-month period.
The all items index rose 2.7 percent for the 12 months ending November, after rising 3.0 percent over the 12 months ending September. The all items less food and energy index rose 2.6 percent over the last 12 months. The energy index increased 4.2 percent for the 12 months ending in November. The food index increased 2.6 percent over the last year.”
Looking at table A below, we can see that on an annual basis, energy services and Shelter are up fairly significantly. But the biggest gainer was Fuel Oil.
All Items vs. Less Food and Energy
Although these “Seasonally Adjusted” numbers are slightly different than those typically presented by the BLS, the following chart from the Federal Reserve shows the gap between inflation with and without Food and Energy. So, we can see how much food and energy contribute to overall inflation.
Energy prices are no longer a mitigating factor. Now, without food and energy, inflation would be slightly lower (Red line is now below Blue line). But due to the upward pressure of Energy, total inflation, according to the FED, is 2.71%. However, this is primarily due to heating oil while gasoline prices are headed down.
Source: St. Louis FED
FED Monetary Policy
December 2025 FED Summary:
- FED lowered FED Funds Rate 3 Times in 2025 to a new range of 3.5% to 3.75%.
- FED officially shifts from Quantitative Tightening
- M2 Money supply is rising
- FED Funds Rate 3.88% in November
- The Fed’s December 2025 asset-policy shifts were designed to make its late-2025 rate cuts actually work by restoring sufficient liquidity to money markets—loosening technical conditions without launching full quantitative easing.
Quantitative Policy
The Fed officially ended its quantitative tightening (QT) program effective December 1, 2025, stopping the automatic runoff of its large portfolio of Treasury and agency securities that had been shrinking the balance sheet since 2022.
But… Despite the FED cutting rates twice in 2025 …
Lowering rates usually reduces the demand for reserves, which should ease liquidity pressure.
But the opposite happened:
- Years of quantitative tightening (QT) had pushed bank reserves toward the lower boundary of “ample reserves.”
- As rates dropped, demand for repos and T-bills increased.
- Money market conditions tightened further.
Result:
Even though the Fed cut rates, short-term funding markets got tighter because QT had shrunk reserves too much.
So, on December 10, 2025, the Fed announced “Reserve Management Purchases” (RMPs):
- Roughly $40B in T-bill purchases in the first month
- All principal payments reinvested into T-bills
- Authorization for more short-maturity purchases as needed
The FED hopes that these inflationary forces will counteract a tightening Job market and the deflationary effects of AI.
FED Assets and M2 Money Supply
M2 Money Supply
BUT… rather than continuing to decline in 2023 through 2025 as FED assets do, M2 (#5) returns to roughly the same slope of increase as from 2012-2020 (#1), despite FED assets declining. This could be the reason for the rebound in the stock market, beginning at about the same time as this uptick in M2. The more money sloshing around in the system, the more that finds its way into the stock market.
Global M2
The Global M2 Money Supply is inching up rather than exploding as it did in early 2025. But with the FED easing that situation may change. FED Chairman Powell will be replaced in May, and Trump is pushing for looser monetary policy.
FED Funds Rate
The FED Funds rate fell to 3.88% in November after being as high as 5.33% a little over a year earlier.
September’s Inflation Prediction vs. Actual:
At 2.74%, November’s inflation numbers came between the “Most likely” and “Likely low” projection that we made in September.
Go here to view our current MIP projection.
Inflation Chart
Monthly Inflation Compared to Previous Years:
The monthly inflation rate for November 2025 was not reported due to the government shutdown.
But the combined rate for the 2 months of October and November was -0.21%.
A year earlier, in October 2024, monthly inflation was a low 0.12% and in November 2024 it was -0.05%. So, -0.21% reduced the annual inflation rate.
See: Monthly Inflation Rate for more information and a complete table of Unadjusted Monthly Rates.
Misery Index
Unemployment 4.60% + Inflation 2.74% = 7.34%
This month, inflation is up slightly, as is unemployment, and so the misery index is up to 7.34%. For the first half of 2024, the Misery index hovered around 7% before falling to the high 6s. It finished the year at 6.99% and moved up very slightly to 7.00% in January 2025.
Read More on the Misery Index…
Gold vs. Oil Chart
Gold has been on a tear this year, initially due to foreign Central Bank fear of U.S. policy regarding Russian asset confiscation. This may have sparked some retail investor interest. By comparing two unique commodities, we can get a better picture of whether one is overpriced compared to the other. Since inflation doesn’t affect all commodities equally.
On a historical basis, at the moment, either Oil is extremely cheap, or Gold is ridiculously expensive. But it is also possible that the price of Gold has been manipulated over the last couple of decades, and it is now just popping to its real value. This appears to be the case for Silver. See: High-O Silver to the Moon for more info.
For more info see: Which is Overpriced Oil or Gold?
Both BTC and ETH have generated Sell Signals in recent months.
For more information, see: Crypto ROC.
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