🥛 Is inflation on the way down? 📉

GM. This is Milk Road Macro, the newsletter that checks inflation data the way you check a receipt after self-checkout… very carefully and with trust issues.

Here’s what we got for you today:

✍️ What’s going on with inflation data?
🎙️ The Milk Road Macro Show: The Fed Has Lost Control of the System, And Nobody Knows How It Ends w/ Chris Irons
🍪 Gold and silver are among this year’s biggest winners

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WHAT’S GOING ON WITH INFLATION DATA?

U.S. inflation has been accelerating in recent months.

Many people are concerned about a continued rise in prices.

And it’s causing Federal Reserve members to remain cautious about cutting interest rates.

But last week, we saw a wacky inflation report - showing CPI (Consumer Price Inflation) is now falling notably.

This was definitely a weird data print - with many unanswered questions.

So, what did the inflation report say?

Are there issues with the data?

And is inflation actually falling - or was this just an anomaly?

Let’s take a look…

So what did the inflation report say?

On Thursday last week, we got the November CPI (Consumer Price Inflation) report.

The October report was skipped entirely, because a lot of data wasn’t collected during the government shutdown that occurred in October.

For November, year-on-year CPI printed 2.7%, falling from 3% in September, and well below the consensus estimate of 3.1%.

Source: Zero Hedge

And year-on-year Core CPI (which strips out the volatile food and energy segments) printed 2.6%, falling from 3% in September, and well below the consensus estimate of 3%.

This is the lowest level in years.

Source: Zero Hedge

These numbers were ice cold - well below consensus expectations.

In fact, Core CPI came in lower than all 62 forecasters' predictions in Bloomberg’s survey.

This report was a massive surprise - and if we measure the actual number vs economist estimates, it was the biggest “downside surprise” since 2009.

Source: Bloomberg

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WHAT’S GOING ON WITH INFLATION DATA? (P2)

But are there issues with the data?

However, this CPI report comes with a big asterisk.

The longest-ever government shutdown prevented the BLS (Bureau of Labor Statistics) from collecting much of the October price data.

That not only limited the agency’s ability to determine month-over-month changes, but some economists think it likely impacted the November figure as well.

This November print has been labeled a “Swiss cheese CPI report” - with holes all over the data.

Speaking earlier this month, Fed Chair Jerome Powell said the November CPI data “may be distorted”.

Paul Ashworth, chief North America economist at Capital Economics, said:

“It’s possible that this does reflect a genuine drop-off in inflationary pressures, but such a sudden drop in some segments is very unusual, at least outside of a recession. The upshot is that it looks like we all have to wait until the December data is published next month to verify whether this is a statistical blip or a genuine disinflation."

Stephen Stanley, chief U.S. economist at Santander, said:

“I think it would be unwise to dismiss the results entirely, but I also believe it would be rash to take them at face value.”

Disinflationary pressures building

While there are a lot of valid questions surrounding this particular CPI report, I still think there are disinflationary pressures building.

This can be seen in inflation swap markets.

One-year inflation swaps show market-derived expectations of average inflation looking ahead one year.

They had been moving higher through most of 2025, anticipating inflationary pressures building.

But they’ve been plunging lower since September, and particularly in the past few weeks.

Source: Augur Infinity

This shows that market-derived expectations of average inflation have fallen from 3.5% to 2.2% in just four months.

And the price of crude oil has also been sliding lower.

Crude oil is historically heavily correlated to CPI, because it's a big business input cost for shipping, transport and production.

Source: TradingView

My current view is that we will probably see inflation generally decelerating through the first half of 2026.

I think the November report should have shown inflation decelerating - but maybe not by as much as it did.

Bloomberg economists agree.

In a note, they wrote:

“While we take this report with a grain of salt, we do think there’s some real signal of slowing inflation, and the chances of a rate cut in January have increased. We expect the Fed to cut by 100bps in 2026.”

Markets not yet convinced

While this CPI report was ice cold - the questions over the data left markets skeptical.

Asset markets across the board didn’t react how you might expect them to react if they were convinced that this CPI report was credible.

You’d also expect this CPI report to lead to higher expectations of Federal Reserve rate cuts in 2026.

But rate cut expectations barely budged.

So, the market wasn’t really convinced by this report.

It looks like we need to see a more credible report to get on board with the disinflationary theme.

Wrapping up

This was an ice cold inflation print - no doubt about it.

But due to the data issues, this CPI report really needs to be taken with a grain of salt.

Nevertheless, I still think there are disinflationary pressures building - regardless of the questions surrounding this particular print.

The December CPI report (released on January 13) should carry more weight and provide a cleaner read for the market and for the Federal Reserve.

And it could be an important report, because it will be released before the next Fed meeting in late January.

That’s it for this edition - catch you in the next one.

THE SYSTEM IS OFF THE RAILS 🚨

In today’s episode, we sat down with Chris Irons (Quoth the Raven) to talk about why global monetary policy has become unprecedented and what that means for markets heading into 2026.

Here’s what you’ll hear:

Why record valuations, runaway debt, and post-COVID liquidity have pushed markets far from economic reality
The Fed’s impossible dilemma of fighting deflation and inflation at the same time and why nobody knows how it ends
What actually broke in 2025 and the early warning signs to watch in credit, jobs, and the bond market
How Chris is thinking about positioning for tail risks, inflation hedges, and asymmetric opportunities going forward

Don’t sleep on this one 👇

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