It may not be time to rejoice quite yet, but folks can take some solace this holiday season as the latest consumer price index (CPI) report showed that the downward trend of inflation has continued. 

Tuesday reports from the U.S. Bureau of Labor Statistics (BLS) showed that overall inflation dropped again in November, falling to 7.1%—down from 7.7% the previous month. This marks yet another month that the trajectory of inflation has beat expectations. 

Core inflation, which excludes more volatile food and energy costs, also eased—from 6.3% to 6% last month. 

While inflation is still well above the 2% target inflation level that the Federal Reserve has been aiming for, that hasn’t stopped the stock market from taking November’s CPI reading for a win—or at least a positive sign that inflation is peaking. 

CNBC reports show that the Dow Jones Industrial Average gained 521 points, or 1.5%, in a sudden move after the inflation numbers were released. The S&P 500 added 2.3%, while the Nasdaq Composite rose 3.2%.

Tuesday’s inflation numbers come ahead of another Fed meeting that will likely yield another interest rate hike. However, expectations are pointing toward a slight deviation from recent Fed trends.

Since implementing its rate hike efforts earlier this year, the Fed has raised its interest rates at the fastest pace since the early 1980s to combat inflation. Fed officials have been increasing rates by 75 basis points in the past four meetings. 

Pundits and onlookers anticipate that Wednesday’s meeting will yield a smaller increase of 50 bps, bringing rates between 4.25% and 4.5%, the highest level since December 2007.

“The CPI report is good news that inflation is headed in the right direction,” said Dr. Lisa Sturtevant, Bright MLS chief economist, in a statement. “The decision by the Federal Reserve to raise rates again this week was probably unaffected by the report, and we will most likely see a half percentage point increase.”

There is still some uncertainty amid the good news, particularly regarding the impacts on real estate. The cost of shelter, which includes rent and owner-equivalent rent, was the most significant contributor to inflation last month, rising by 0.6%.

While home prices have fallen from their summertime peaks in most local markets, rent growth has begun to moderate, according to Sturtevant, who highlighted that cost of shelter lags behind other indexes.

“Affordability has been a major challenge, as higher mortgage rates have pushed the typical monthly payment up by more than $1,000 over the past 12 months,” she said. “Housing costs have a unique, symbiotic relationship with inflation.

“As inflation comes down and the Federal Reserve eases up on interest rate hikes, homebuyers should see mortgage rates fall, which will make the cost of buying a home less expensive,” Sturtevant continued. “But while the Fed’s actions earlier this year caused mortgage rates to shoot up quickly, we should expect that they will come down much more slowly and will likely remain above 6% in 2023.”

Jordan Grice is a senior editor for RISMedia.

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