Headline CPI came in at 3.12% in November, which is .11% lower than in October. From September to October the headline dropped .46%. For the year, we’ve averaged a monthly drop of .29%. So the pace of disinflation is slowing.Additionally, YOY changes in prices are still higher than June, so we’ve made no progress in the 2nd half of the year.The Core CPI dropped a measly .03% to 3.99% and both price measures remain above the 2% target. 
The headline number is being helped lower by energy prices which are down 5.4%. 
The Core is being buoyed by services inflation which is still running at 5.5% and shelter inflation which is running over 6.5%. 
The inflation is not because of goods, its about labor and the cost of facilities. This shows up in a few series, notably in motor vehicle maintenance and repair. It’ll cost you 8.5% more in 2023 to take your car to the shop; but the parts cost the shop 1.5% less than last year. There is also a jump in water/sewer and trash collection which is still running hot at 5.35%. This isn’t surprising given all the union activity helping their members keep up with cost of living increases. You’ve been touched by the Teamsters. 
The market reaction: Bond yields jumped 7 bps and oil went down 4%. Fingers crossed that oil keeps going down because the shelter component is being stubborn. The market is now giving a rate hike tomorrow a 1.6% probability, up from .2%. The market thinks the May meeting is the most likely time for a rate cut. A cut at the March meeting is being given a 42% chance.More By This Author:Macro: EmploymentMacro: GDPNow – 1.3%Macro: ADP Employment
