President Trump talks about affordability at McDonald’s forum
Trump joked that he was the “first former McDonald’s fry cook” to become president.
Inflation eased slightly for U.S. consumers in November, with prices rising 2.7% from a year earlier, the Labor Department said in a Dec. 18 report.
The annual inflation rate had risen to 3% in September. The slight decline in November reflected a moderation in price increases, particularly for gasoline and new cars. Core inflation, which excludes volatile food and energy items closely monitored by the Federal Reserve, was 2.6%.
Perhaps just as interesting is what the Bureau of Labor Statistics didn’t say: what happened to consumer prices in October.
Due to the longest government shutdown in the country’s history, no inflation report will be released for October, leaving a permanent one-month gap in the historical record.
The blunder also meant that the Labor Department failed to report month-on-month changes in consumer prices in November. In a normal month, economists rely on monthly price movements to provide signals about the direction of the economy.
Here’s what we know: Inflation has steadily risen in the months since President Donald Trump imposed aggressive import tariffs, driving up consumer prices over the summer and fall.
Annual inflation in April was 2.3%, the lowest level since early 2021. In September, the index rose to 3%, its highest level since January.
Tariffs will accelerate inflation in 2025
The difference, economists say, is tariffs. According to a November paper published by the National Bureau of Economic Research, the import tax increased inflation by about 0.7 percentage points through September 2025.
Retailers are passing on some of the tariff costs to customers, pushing up prices in some categories even as price increases in other areas such as rent and gasoline have slowed.
Economic forecasters had widely expected the consumer price index to hover around 3% in November.
Some analysts have questioned the accuracy of the latest inflation data. The government shutdown began on October 1st and ended on November 12th. This gap, along with the Thanksgiving holiday in late November, limited the government’s time to collect data on prices.
Missing data could “cloud” November’s readings, Morningstar reported.
How does inflation affect interest rates?
Prolonged inflation will complicate the Fed’s job, but Fed leaders must decide whether to continue lowering rates at their next meeting in January 2026.
The Fed typically raises interest rates to control inflation and lowers rates to stimulate the job market. At the moment, both indicators appear to be trending in the wrong direction.
According to the latest employment statistics, the unemployment rate rose to 4.6% in November, the highest level since September 2021.
The Fed’s annual inflation target is 2%, low enough that consumers don’t really care. The consumer price index was nearing its 2% target when President Trump announced the tariffs, and the index has since surged.
“Returning inflation to the Federal Reserve’s 2% goal remains a long process, and the Fed currently projects that it may not be until 2028 to reach that goal,” said Stephen Kates, a financial analyst at Bankrate.
Economists say 3% inflation is problematic, but far from an inflation crisis. Bill Adams, chief economist at Comerica Bank, said this is rather “frustrating” for U.S. consumers. “You can see that there is a deep misfortune in this.”
Most forecasts predict that inflation will remain in the 3% range until early 2026. Fed Chairman Jerome Powell said in a Dec. 10 press conference that he expects the tariffs to push up inflation by an additional “two-tenths” next year.
Other observers are more optimistic.
“Tariff increases are over and the downward price trend is back on track,” said Jamie Cox, managing partner at Harris Financial Group. “Consumers will quickly realize the benefits of lower prices in 2026.”
