US Core CPI for November 2025 dropped to 2.6% year-over-year, the lowest level since March 2021 and well below economist expectations of around 3.0%.

Headline CPI came in at 2.7% y/y, also cooler than the forecasted 3.1%. This report released recently, combined with data for October and November due to a prolonged federal government shutdown that disrupted October price collection by the Bureau of Labor Statistics (BLS).

No separate October CPI was published, and monthly changes for November alone weren’t calculated—instead, a two-month— September to November change of about 0.2% was reported for both headline and core indexes.

The shelter category, which makes up over 40% of core CPI, showed an unusually sharp slowdown: essentially flat or up only ~0.2% over the two months. Prior to this, shelter had been rising ~0.3% monthly on average through the first nine months of 2025.

Economists widely attribute this to distortions from the shutdown: BLS couldn’t collect survey data for October and couldn’t retroactively gather most of it. For missing data, prices were likely “carried forward” imputed as unchanged, creating a downward bias.

Data collection resumed only mid-November, potentially capturing more holiday discounts and missing earlier price trends. Analysts describe the report as “noisy,” “downwardly biased,” “Swiss-cheese,” or warranting “the entire salt shaker” of skepticism.

Many expect a rebound in the December CPI due January 13, 2026, with clearer, undistorted data. Despite the low reading, shelter y/y still rose 3%, contributing significantly to remaining core inflation pressures. Apparently, while markets reacted dovishly boosting rate-cut odds, the Federal Reserve is likely to downplay this report and focus on upcoming cleaner data.

The shelter component is one of the largest parts of the Consumer Price Index (CPI), accounting for about one-third around 33-40%, depending on exact weighting of the overall basket and over 40% of core CPI which excludes food and energy. It includes: Rent of primary residence actual rents paid by tenants.

Owners’ equivalent rent (OER) estimated rental value of owner-occupied homes, the biggest subcomponent. Lodging away from home e.g., hotels. Shelter has been a persistent driver of inflation in recent years, often rising faster than other categories due to lagging effects from the post-pandemic housing market.

The November 2025 CPI report showed an unusually sharp slowdown in shelter inflation: the shelter index increased just 0.2% over the two-month period from September to November 2025 averaging ~0.1% per month. This was far below the typical ~0.3% monthly pace seen in the first nine months of 2025.

This slowdown was largely artificial and stemmed from data collection disruptions caused by the prolonged U.S. federal government shutdown. The Bureau of Labor Statistics (BLS) could not collect survey data for October 2025, as field staff were furloughed. These survey data especially for rents and OER, which rely on in-person or phone surveys of landlords and tenants cannot be collected retroactively.

Per standard BLS procedures, missing prices were handled via carry-forward imputation: October prices were assumed unchanged from the last available data often from September or earlier periods, such as April for some rent samples.

This effectively set shelter price changes to zero for October in many cases. Data collection only resumed on November 14, 2025, covering roughly half the month and potentially capturing more end-of-month discounts around Black Friday. As a result the two-month shelter increase was biased downward.

Primary rents rose an implausibly low ~0.06-0.1% on average over the two months. OER rose ~0.14%. Economists widely view this as “noisy” or “downwardly biased” data. Private-sector measures like Zillow, Apartment List showed ongoing rent growth during this period, inconsistent with near-zero BLS readings.

Shelter’s heavy weight amplified the distortion, contributing to the surprisingly low core CPI reading of 2.6% y/y, lowest since March 2021. Many analysts from Morgan Stanley, Wells Fargo, Harvard’s Jason Furman expect a rebound in shelter inflation in upcoming reports, particularly December 2025 CPI, which will have full-month undistorted data.

Some lingering effects may persist until the missed October sample is fully replaced potentially into spring 2026. The shelter slowdown reflects methodological necessities due to the shutdown, not a genuine sharp drop in housing costs. Cleaner data in future reports should provide a more accurate picture.