Headline CPI Ticks Up & Restaurant CPI Continues Lower

Consumer pushback continues to erode restaurant pricing power

October Restaurant CPI continued its trend lower at 3.8% versus 3.9% in September, with Limited Service dropping below 4% to 3.8%, the lowest level since May 2020. Food at Home also dropped back down to 1.1% after successive ticks up since August. Despite the slight tick up in headline CPI, the consensus probability of another 25pt Fed Funds rate cut in December rose to 80% (from 60% before the report).

Borrowing Costs Defy Fed Rate Cuts

Despite the Fed’s rate cuts, consumer borrowing costs are not following suit. 30 year Mortgages have moved higher in November indicating that despite Fed rate cuts, the bond markets anticipate higher borrowing costs over the longer term. This is largely driven by expected changes in policy from the incoming administration, factoring expected growth but also increased deficits and higher inflation from tariffs and labor…