Wall Street’s initial euphoria over a cooler-than-expected November inflation report gave way to skepticism as economists raised concerns about methodological distortions caused by October’s canceled data collection during the U.S. government shutdown. The Bureau of Labor Statistics reported annual CPI at 2.7% and core CPI at 2.6%—both well below forecasts—but analysts warned the figures may be artificially suppressed due to technical assumptions.

A key point of contention is owners’ equivalent rent, a critical housing inflation component. UBS economist Alan Detmeister noted that OER price changes for October appear to have been “set to zero,” while Evercore’s Krishna Guha suggested the BLS assumed zero inflation in multiple categories for about one-third of sampled cities. This could create a downward bias that persists for months before reversing sharply in spring 2026.

Methodological Ambiguity Undermines Confidence

“The downside surprise reflects weakness in both goods and services, but may be partly due to methodological issues,” said Michael Gapen of Morgan Stanley, calling the data “noisy” and difficult to interpret. He cautioned that if technical factors drove the weakness, “we could see reacceleration in December.”

Other anomalies include the BLS’s data collection occurring later in November, potentially capturing more holiday discounting and skewing goods categories downward. Stephanie Roth of Wolfe Research noted that while markets viewed the report as dovish, the Fed is likely to “put less weight on this reading” given the shutdown-related volatility.

Market Reaction Fades Amid Uncertainty

Initially, stocks rallied and Treasury yields fell as traders increased bets on a March Fed rate cut. However, enthusiasm waned through the trading day, with banks and economically sensitive stocks turning negative while tech held gains. Yields also pared earlier declines.

The episode underscores the challenges of interpreting economic data amid collection disruptions. With the Fed emphasizing data dependence, November’s CPI may offer little reliable guidance, leaving policymakers to await clearer signals in coming months. As Roth observed, while the report suggests inflation isn’t aggressively reigniting, a “bounce back” is likely as methodology normalizes—a reminder that statistical noise can sometimes masquerade as trend.